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  • Cammy Smith

Why Financial Advisory Teams Need ESG and SRI as a Growth Strategy in 2020

For financial advisors, client expectations and preferences will differ significantly, and so they need a wide variety of investment solutions. As clients become more familiar with what is available, they explore Sustainable and Responsible Investing [SRI] more closely. Additionally, studies are showing that clients have an increasing desire to align investing with their values.


When discussing with clients for the first time, explaining the terminology is vital and we even recommend having a take-home cheat sheet to capture the nuances. Here is a review of the basics.


What is the difference between SRI and ESG?

ESG integration is the explicit inclusion of Environmental, Social and Governance risks and opportunities into traditional financial analysis based on a systematic approach and accurate research sources. ESG may be about economic value while SRI is an attempt to incorporate ethics, social, and environmental concerns into portfolios to generate positive returns and positive world impact.


What is an ESG strategy?

A key strategy of sustainable and responsible investing is incorporating environmental, social and corporate governance (ESG) criteria into investment analysis and portfolio construction across a range of asset classes. The approach may be to either include, avoid, or both include and avoid companies that do not meet ESG performance thresholds. Many investors recognize that transparent ESG corporate information is crucial to understanding their purpose, strategy, and management quality.


What are SRI Funds?

Sustainable and Responsible Investing is an umbrella term that encompasses social investment, sustainable investment, socially conscious, "green" and ethical investing. SRI is any investment strategy seeking to consider both financial return and social/environmental good to bring about social change regarded as positive by proponents.


Why SRI is important?

SRI investing has become an important asset class with a 25% growth between 2014 and 2016 and growing. The asset under management (AUM) in SRI has reached USD23 trillion in 2016 (30% of global AuM).


The smart money in the US and Europe are already allocating to this space with 52% of all investable assets in Europe and 22% in the US are managed with either a sustainable, responsible, or impact investing style.


Most notable is that 70% of the worldwide wealth will be in the hands of women and millennials (USD65 trillion) by 2025 and both groups prefer a purpose and impact-led investments, in addition to financial return.


How can Finance Firms incorporate ESG and SRI as a Growth Strategy?

Since ESG is seen as core to the way today’s responsible businesses operate, it is quickly replacing another acronym, CSR or Corporate Social Responsibility.


CSR represents a company’s efforts to have a positive impact on its employees, consumers, the environment and the wider community. It’s a form of self-regulation that most large companies report annually. ESG, on the other hand, measures these activities to arrive at a more precise assessment of a company’s actions. The biggest difference is metrics

ESG looks at how businesses:

  • Respond to climate change

  • Treat their workers

  • Build trust and foster innovation

  • Manage their supply chains

  • Construct corporate boards and enact decision-making.

So instead of company statements, ESG concerned clients’ demand metrics.


For example, environmental programs that demonstrate kilowatts of energy saved, carbon emissions avoided in tons, or gallons of water preserved with targeted efforts to continue will be in-demand investments for clients.


SRI as Key to Investment Decisions

As a key assessment marker for investors, ESG and SRI activity is now seen as vital to understanding the corporate purpose, strategy, and management quality of companies.


Indeed, a quarter of the world’s professionally managed investment funds now only invest in companies that demonstrate solid ESG credentials. ESG and SRI aren’t just added bonuses of corporate practice but are instead expected.


In other words, it is not just about doing the right thing - it’s also generating high returns.


Study after study has shown that a companies' approach to ESG has had a measurable impact on their financial performance, and this evidence has led to investors increasingly integrating ESG criteria into their investment processes.


Financial Advisors Working with ESG-Demanding Clients

At Revive Consulting+, we help you take your traditional investment philosophy and process and introduce options for ESG considerations and investment portfolios into your practice.


We advise having a clearly defined and transparent methodology for integrating ESG analysis and implementing SRI portfolios. We teach you key talking points and help you develop or select various SRI portfolios. We also help you develop a values-based approach for working with your clients to learn what is most important to them - aligning their values with their investment goals.


Revive Consulting+ Will Help You Strategize Growth Opportunities

SRIs cover a large and rapidly growing universe with multiple dimensions but we can help you navigate this field.


What is clear is that sustainable investing and the ability for one person to have a positive impact continues to be of growing importance in 2020. You can do well by doing good, gain client loyalty and satisfaction with SRI options, and use it as a way to grow AUM and revenue. Contact us today to have a free consultation on ESG and SRI portfolio management and growth strategies.



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