The Money Management Institute (MMI) has partnered with Morningstar in a joint initiative, the MMI/Morningstar Sustainable Investing Initiative, to help educate advisors about the sustainable investment opportunity, notably the incorporation of environmental, social and governance or ESG factors, and how to better implement these strategies in their practices.
“This is a tremendous growth opportunity for the U.S.,” Marie Dzanis, FlexShares’ Head of Distribution, told ETF Trends in a call. “This is a turning point in the U.S. to be involved in this type of thinking.”
The program will be based on educational resources, workshops, forums and thought leadership intended to aid advisors build knowledge to engage clients and hopefully be more comfortable in recommending sustainable investments, like the ESG-theme.
“Clients are clearly interested in discussing ESG with their financial advisors,” Jon Hale, Morningstar’s Head of Sustainability Research, told Wealth Management. “But the majority of advisors need more professional education and practical insights on incorporating sustainable investing into their practices to feel comfortable having those conversations.”
Backing up the initiative, Calvert Research and Management (an Eaton Vance affiliate), Merrill Lynch and FlexShares Exchange Traded Funds at Northern Trust Asset Management have also come out in support of the program both by underwriting the launch and contributing to developing the curriculum going forward.
“Responsible investors deserve strong performance, high-quality ESG research, shareholder engagement, and clear impact reporting,” John Streur, president of Calvert Research and Management, told Wealth Management. “This program will teach them how to get what their clients deserve.”
“ESG provides broad investor appeal and is a solid way to invest and gain increased risk-adjusted returns,” Dzanis said.
For example, joining the new wave of ETF products based on ESG principles, FlexShares has come out with the FlexShares STOXX US ESG Impact Index Fund (NasdaqGM: ESG) and FlexShares STOXX Global ESG Impact Index Fund (NasdaqGM: ESGG).
The funds are based on the STOXX global ESG Impact Index, which screens companies scoring better with respect to a select set of ESG key performance indicators (KPIs), with the bottom 50% of such companies based on their ESG KPI scores excluded from the Index, as are companies that do not adhere to the UN Global compact principles, are involved in controversial weapons or are coal miners.
“KPI integration improves bottoms-up security selection while removing data-provider bias,” according to FlexShares. “The methodology builds an ESG index by essentially coding at the ‘root’ level versus applying an overlay or top-down ESG strategy; it parallels the best behaviors of portfolio managers when it comes to evaluating, sorting and selecting companies for investment.”
For more information on the ESG theme, visit our socially responsible ETFs category.