The Transition to Sustainable Investment: Insights By Ethic
Tuesday, May 2, 2023
May 2023
The Transition to Sustainable Investment: Insights By Ethic

A new series for wealth advisors about the future of sustainable investing

By Melissa Banigan

Corporate behavior greatly influences our world. For example, a few hundred trailblazing companies are setting a good example by clearly disclosing their environmental impact. Unfortunately, a slew of other corporations are driving some of the biggest negative impacts on our planet and communities. For example, just 100 fossil fuel producers have been responsible for 71 percent of global greenhouse gas emissions since 1988. 

Due to growing awareness about corporate behavior and responsibility, interest in sustainable investing has surged in recent years. Investors are realizing that as shareholders, they can drive change and corporate accountability. In the United States, assets managed with sustainability criteria are growing at a compound annual growth rate of 12.9 percent, and institutional investment focused on the same criteria is expected to rise 84 percent to $33.9 trillion USD in 2026, making up 21.5 percent of AUM. 

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Some wealth advisors are already helping investors implement sustainability into their investment strategy, but a fear of greenwashing, the lack of education, and concern over reputational risk are preventing others from doing the same. These factors can directly influence the decisions investors make. According to a 2022 Gallup poll, while close to half of investors are interested in sustainable investing, few are actually doing it. Further, it’s our view that of those, even fewer are doing it well. 

We developed our new series, “The Transition to Sustainable Investment: Insights by Ethic,” to help advisors better understand the sustainable investment landscape so they can help their clients make more informed sustainable investment decisions. Chock-full of engaging articles, videos, data visualizations, and more, the series is designed to serve as both a compass and a guide for wealth advisors navigating their own sustainable investment practices and the sustainable investment journeys of their clients. 

Why Us? And Why Now?

Sustainability is in our DNA. We didn’t simply transition to sustainability as part of a global fad — we built our entire company around it because we believe it’s the only way to do business and address the barriers to having impact. 

For the past seven years, our multidisciplinary team, with backgrounds in finance, engineering, technology, data and research, and storytelling, has been committed to simplifying the complex world of sustainability for thousands of wealth advisors and their clients. Our community includes advisors who are already helping to lead the sustainable investment movement by empowering their clients, who are world leaders, large institutional investors, leading climate change activists, and large social justice movements, among others, to align their values with their investments. It also includes the leaders of companies with strong sustainability mandates who are just as committed to developing corporate governance policies that positively impact their teams as they are to environmental and social policies that impact the world at large. And it includes government officials engaged in changing policy and celebrities who use their platform to amplify the issues that matter to them.    

In “The Transition to Sustainable Investment: Insights by Ethic” series, we will lean on the expertise of our team and the greater community to answer some of the most pressing questions facing the wealth advisory community today:

  • What does a future look like where sustainable investing is the norm? 
  • What kind of sustainable investment tools can help balance growth and impact for your clients? 
  • Should advisors tell their clients to focus on divestment, engagement, or both of these strategies to make the biggest impact? 
  • How can advisors integrate tax management strategies into the solution? 
  • How do we feel about the growing push for sustainability disclosures? 
  • What is our point of view on the politicized elephant in the room: the misunderstandings around the meaning and scope of ESG and the political backlash against using investing for impact? 
  • Most importantly, what concerns do wealth advisors have about sustainable investing, and how can we address them head on?

Who is This Series For?

Even a few years ago, many wealth advisors wondered why they should make the transition to sustainable investment. The jury was still out, and the idea that the role of the advisor is to help define both financial and impact goals and understand how sustainable investment could help clients to reach their impact goals had not yet been adopted. But today, it’s more broadly understood that sustainable investment can help to balance growth and impact for clients. Therefore, today, rather than ask, “Why should we make the transition?” we believe a more appropriate question is, “Why not?”

Ethic believes that one day, all investing will be sustainable investing – and over 70 percent of global business leaders believe sustainable investments will increase by at least 20 percent within the next five years. But we recognize that while some advisors are already building more sustainable investment businesses, others are cautious about entering the sustainable investment ecosystem. They are skeptical that sustainable investment is anything more than a passing fad, or that clients would even be interested in sustainable investing offerings. 

We get it. The unknown can be frightening. And it can be hard to cut through the noise out there in the media about sustainable investment. But education is power, and we aim to meet every wealth advisor where they’re at. We work under the premise that investing is deeply personal. Therefore, no matter where a wealth advisor or their client sits along the sustainable investment spectrum, we believe they have unique values that can influence their investment approach. 

Do you enjoy spending time outdoors and want to protect the world for your children? Or support strong education systems that prepare them for meaningful, lucrative careers as adults? If so, these are values that can inform your sustainable investment approach. Do you think we ought to better protect natural resources so your family can hunt or fish for generations to come? This is also a value that can inform how you invest. What about employees and peers? Do you feel they should be treated fairly in the workplace? You guessed it: that’s another value that should be reflected in your investments.

While the sustainable investment journey will look different to each of us, “The Transition to Sustainable Investment: Insights by Ethic” provides information, data, and insights that support not only the sustainable investment evolution of individual wealth advisors, but also the potentially seismic global transition to sustainable investment. 

Sources and footnotes
Contributors

Melissa Banigan is a content strategist with over 15 years of communications experience working with global companies and nonprofits. Also a journalist and author, her work appears in The Washington Post, CNN, the BBC, NPR, and the Independent, among other publications, and she's written three books for youth.

Alex Laipple is originally from Pittsburgh, PA, now living in New Jersey with wife Meghan and his  four daughters Charlotte, Ruthie, Quinn, and Ellie. Alex has over 15 years’ experience in Business Development and Growth roles within start-ups and asset management firms.

Rebecca Hu is Sustainability Project Director at Ethic. Previously Rebecca worked on Hillary Clinton’s 2016 Presidential Campaign and studied Engineering and Studio Art at Dartmouth College.