US Videos

How Advisors Can Reach Out on Sustainable Investing

Jeremy Glaser
Jon Hale, Ph.D., CFA

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. Today, I'm joined by Jon Hale, he is the director of sustainable investing research here at Morningstar. He recently had the chance to attend a few conferences on sustainable investing, and he had a few big takeaways.

Jon, thanks for joining me.

Jon Hale: My pleasure.

Glaser: Let's start with the way that advisors talk to their clients about sustainability. We've discussed in the past how this is growing in importance to many clients, but sometimes advisors don't quite know how to grapple with that. What did you learn about the way that sustainability should be talked about?

Hale: I was at the Sustainable Investing Conference at the U.N. last week. It was a very interesting conference because it was at capacity--600 advisors; there's so much interest out there among advisors in how to incorporate this into their investment process. What we heard at that conference, we heard from Morgan Stanley, who was saying that in their surveys of individual investors they are getting a huge number, 75%, 80% of investors saying I would be interested in sustainable investing, but advisors are saying I'm not hearing that necessarily from all that many clients--most of them are saying more are asking about than in the past--but I'm not getting this overwhelming response.

One of the takeaways from the discussion there was that what advisors might need to do is bring it up themselves, because a lot of investors who may be interested may not be so interested and especially so well-informed about it that they feel like it's something they can bring up with an advisor. If an advisor can elicit that support for sustainable investing by bringing it up themselves, then they are starting to forge a link between themselves and their client. It potentially can make the client a better investor themselves because it's a more meaningful set of things that they are doing with their investments, and it's all for the good. But to expect that 75%, 80% of investors are going to just proactively bring it up is probably not realistic.

Glaser: Another takeaway is more on the asset manager side in that we are seeing a lot more of mainstream asset managers be more interested in ESG investing.

Hale: It was very interesting. We saw at Principles for Responsible Investing, an organization originally U.N.-backed, started 12 years ago and now has 2,000 signatories, asset managers, and institutional investors. Their annual global conference in San Francisco last week--oversubscribed, record number of attendees. The thing you notice there was that there were so many asset managers we would consider to be conventional asset managers. One of the main sponsors was MFS, lead sponsor; PIMCO was all over the conference. What these conventional investors have done basically is, they have incorporated ESG into their investment processes. It's very interesting to see the various ways in which they are doing that. They are not necessarily relabeling strategies as ESG, outcome-oriented strategies, but they are routinely incorporating it into what they do.

Then in addition to that, they are increasingly interested in what we call impact investing. A PIMCO--Scott Mather was there on a couple of panels--really saying, here, we're over a $1 trillion asset manager; what is the overall impact of the investments that we make on some of these broader issues. The U.N. two years ago backed a series of what they call sustainable development goals that really are starting to serve as a framework for investors who want to better evaluate what the impact is on their investments. We are seeing a lot of asset managers move in that direction.

Glaser: Do you think that impact piece will eventually become bigger than thinking about ESG--environment, social, governance--into being that granular, and people will think in that bigger picture? How do you see that playing out?

Hale: I think it's another dimension of sustainable investing. One is, focusing your investment process on using ESG criteria to help you be a better investor on the one hand. But then also this idea of impact is very resonant with investors of all stripes. Because when you think about it all investments have some kind of impact. On the whole if you can orient your investments toward a more positive outcome, then not only do you have success financially with your investments, but you are actually helping literally make the world a better place. That's something we are going to see more of going forward.

Glaser: Jon, thanks for the report.

Hale: Thank you.

Glaser: For Morningstar, I'm Jeremy Glaser. Thanks for watching.