(This transcript has been edited for clarity)
Total time: 6:02
Jessica McHugh: My name is Jessica McHugh, Director of Marketing here at Sage Advisory, and I have with me today Emma Smith who is our ESG, environmental, social and governance or sustainable investing research analyst. Emma, you know, we've attended some conferences recently where we spoke with advisors who maybe were familiar with sustainable investing but weren't sure how to go about identifying potential clients for ESG or sustainable investing portfolios. So, maybe if you could start off by providing a brief overview of how Sage views ESG investing, and then we'll talk about how to identify clients who would be interested.
0:37
Emma Smith: Sure, thanks, Jessica. Well, environmental, social, and governance investing is really a comprehensive investment approach that considers a range of sustainability and ESG related risks and opportunities in conjunction with traditional financial analysis. What this approach allows is it allows the investor to dig deeper into the sustainability practices of companies and investments and add another layer of risk mitigation to the overall investment process. Through this analysis, investors can select companies or investments that are more likely to have sustainable earnings over the long term. At Sage, we integrate these ESG factors into our investment process. Our goal with this is to generate repeatable and competitive rates of return, with higher quantitative ESG metrics, allowing us to really achieve that double bottom line we hear about in ESG investing.
Jessica McHugh: Okay. So, what would be some indicators that an advisor’s client might be interested in ESG? Are there any telltale signs?
1:44
Emma Smith: Well, we really think that ESG investing is an investment style that works for any type of client, given that ESG investing is a way of digging deeper into sustainability practices of companies’ investments, and really adding that additional layer of risk mitigation. But if you're looking for some very clear indicators, or telltale signs that would identify a client, that would be a natural fit for ESG investing, you could look for some of the following signs. Are they transitioning their assets to their children? Are they active and social and environmental causes? Are they involved with religious nonprofit or any charity organizations? Have they discussed recycling, or similar topics with you? Do they favor brands that are about the environment and maybe a social cause? Like think TOMS shoes or anything of that nature. Do they drive an electric or hybrid car or bike to work or walk to work? And do they use reusable water bottles, or reusable straws? Or maybe the household finances are managed by the woman. So, these are just kind of some signs you can look for. But as I said, we really think ESG investing is an investment style that works for anybody.
3:00
Jessica McHugh: And so, you mentioned that last one there - household finances are managed by a female in the household. Maybe an obvious indicator that somebody might be interested in sustainable investing, and this is backed up by data, is either they’re a millennial, or they're a woman. Can you talk a little bit about those two demographics?
Emma Smith: Yeah, well, we really see multiple reasons that ESG investing is gone to the mainstream. One, values-based investing has become more important and two, demographics are changing. So, women are expected, and Millennials are expected to control a considerable portion of private wealth going into this next year 2020. And studies show that the majority of women consider ESG concerns somewhat or extremely important. And the majority of millennials consider their investments a way to express their social, political, and environmental values. So, you can see how this demographic change will likely bring even more client demand to the marketplace for ESG investing.
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Jessica McHugh: Okay, great. And then, you know, if you kind of did a little bit of this analysis and just talking with your client, and maybe you think that they are interested in sustainable or ESG investing, are there specific questions that you might ask them?
4:15
Emma Smith: Yeah, well, a really great way to break the ice with clients and prospective clients in terms of ESG investing would be to ask them, just three simple questions. One, do you want your investment dollars to reward companies that have a positive impact? Two, is your existing investment portfolio in line with your personal values? And three, if two portfolios offered the same returns, but one answers yes to the above two questions that I just asked, and the other one doesn't, which one would you choose?
Jessica McHugh: Right, you would think that would be an obvious choice.
Emma Smith: Very easy choice right there.
4:50
Jessica McHugh: Perfect. Well, I hope that was helpful for some advisors who are starting to identify clients that might be interested in ESG, or sustainable portfolios. As always, please don't hesitate to reach out to Sage for more information. Thank you.
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Disclosures: Sage Advisory Services is a registered investment adviser that provides investment management services for a variety of institutions and high net worth individuals. This podcast is for informational purposes only and is not intended as investment advice or an offer or solicitation with respect to the purchase or sale of any security, strategy or investment product. Investors should make their own decisions on investment strategies based on their specific investment objectives and financial circumstances. All investments contain risk and may lose value. Past performance is not a guarantee of future results. For additional information on Sage and its investment management services, please view our web site at sageadvisory.com, or refer to our Form ADV, which is available upon request by calling 512.327.5530.
