“Thanks, but I don’t believe in that stuff…”
While traveling the country this fall, that was the response we received from some financial advisors after the introduction of an investment that focuses on sustainability. When pressed to explain, the common refrain was “ESG or SRI investments underperform, and I want my clients invested in the best companies”.
Unfortunately, thirty seconds in an elevator or hallway is not enough time to build the case for sustainability. But here on AlphaBaskets, we’re afforded the space and time to better explain why Sustainability should matter to them, and you. And rather than start from scratch, let us lead you to a recent piece from Fast Company: http://www.fastcoexist.com/3036010/why-is-goldman-sachs-advocating-for-sustainability
If “Accenture, Deloitte, Goldman Sachs, Harvard Business School, McKinsey & Company, and PricewaterhouseCoopers have released data-driven case studies, global surveys, and exhaustive reports offering compelling proof that using business as a force for good is also good for business”, then how could a financial professional ignore the facts and say “thanks, but I don’t believe in that stuff”? Willful ignorance or a deep-seeded bias? Maybe. Whatever the reason, this cognitive dissonance is present when the facts conflict with preconceived notions.
SRI (Socially Responsible Investing) may have evolved into ESG (Environmental, Social and Governance), but ESG is still a three-letter acronym that some will dismiss as a niche. A three-letter acronym doesn’t describe the future of investing – it just reinforces the negative reaction from the uninitiated or under-educated. This is a movement in the investing world that isn’t going away. Corporate Sustainability, Shareholder Advocacy and Activism, Community Investing, Targeted Divesting, and Impact investing are all parts of the broader message that is gaining the attention of both corporations and investors. If a self-described financial professional does not see that, they’ll be left on the sideline as the industry around them continues to innovate and evolve.
Here’s the funny thing… If a financial advisor asked us to convince them, we wouldn’t even start with all the facts. We would begin with the following logic: Your clients are paying attention to this, learning about this, and looking for guidance. Many of your clients have children, and those children are paying attention to this new shift in investing. Those children are the people that will inherit the accounts you manage, so if you aren’t connecting with them… You won’t be their financial advisors. Beyond potential underperformance, you are risking losing accounts because “you don’t believe in that stuff”.
The question should not be whether you believe in “that stuff”, but rather: “I wonder if there’s an ETF for that?”
This article was written by Michael Marinus Young, AdvisorShares Institutional Consultant.