2. Keep risk in perspective
- Select the degree of ESG integration.
- Assess the broader asset allocation to keep the investment plan properly balanced. Avoid introducing sector or style biases.
- Review personal values and risk framework with clients to help them understand ESG investing considerations.
3. Take the long view
- Understand the client’s perspective and align expectations on non-financial outcomes and reporting.
- Define success as part of the investment plan.
- Modify ongoing reporting to address client’s priorities. Adapt portfolio as motivations shift.
Keep in mind: What is the client’s time horizon and intended impact? How is the client defining and measuring success?
ESG enables clients to invest with greater precision—to apply a broader lens to more deeply analyze investments. Whether they want to match investments with their mission or pursue enhancing long-term performance, ESG can help meet their goals. It’s a new way of valuing the future.
For more on advising clients about ESG investing, you can read “Aim Higher: Helping Investors Move from Ambition to Action with ESG Investment Approaches.”
Originally published by State Street Global Advisors, 8/12/20
1 State Street Global Advisors. “Into the Mainstream: ESG at the Tipping Point.” November 2019.
2 www.cnbc.com. “Your complete guide to investing with a conscience, a $30 trillion market just getting started.” December 14, 2019.
3 Gunnar Friede, Timo Busch & Alexander Bassen, “ESG and financial performance: aggregated evidence from more than 2000 empirical studies”, Journal of Sustainable Finance & Investment, Volume 5, Issue 4, p. 210-233, 2015. Benice Napach, “ESG-Focused Funds Are Outperforming During Pandemic, Think Advisor, May 21, 2020. Morningstar, “How Did ESG Indexes Fare During the First Quarter Sell-off?” April 8, 2020.
4 State Street Global Advisors. “Performing for the Future.” 2017 Survey.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
Investing involves risk including the risk of loss of principal.
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