Skip to Content

It’s Time to Have the Talk ... About Sustainability

Matt and Julie interview Shila Wattamwar and Danika Waddell about sustainability. Shila is the Global Head of Retail and Wealth ESG Strategy and Strategic Partnerships at Morningstar Sustainalytics. Danika is the founder and president of Xena Financial Planning.


Listen to and follow Big Picture in Practice

Apple Podcasts | Google Podcasts | Spotify | Amazon Music | Stitcher

In This Episode, You’ll Hear...

1:47 – Danika's Introduction to Sustainability Investing

When Danika launched her firm, Xena FP, ESG was not her focus. However, she’s found that over the last couple of years, almost every single person that’s wanted to work with her has asked about sustainability, so sustainability has been on her radar since the 90s.

In her experience, there’s currently an insatiable demand and interest in ESG investing.

2:43 – The Drivers of Sustainability

Firstly, there’s greater access to information about ESG and ESG investing. Investors are seeing ESG data points from the sources they trust, as well as their regular investment workflows. ESG issues such as climate change are also more present in everyday conversation, and so the entire industry is responding to that demand. For example, companies like Nike and Facebook are taking stands on certain issues in response to customers who want to spend their money at companies that align with their values.

4:59 – Sustainable Investing as Operational Excellence

To create long-term value, advisors need to think about ESG initiatives because that's what consumers want. While there’s a lot of variation in sustainability—from clients who feel strongly about climate change to others who don’t want their money in particular markets or supporting companies—one consistent theme is a desire for their money to do good in the world.

To respond to this demand, advisors need to sort through the flood of information and determine which ESG dataset is reliable. While every investor is different and meeting each client’s needs can feel overwhelming, the advisor can start the conversation with a simple question: “what’s one thing that we can do?”

9:20 – Making Sense of ESG Data

ESG and sustainable investing have evolved to become umbrella terms. While some still think about sustainable investing in black and white—what aligns to a client’s values and what doesn’t—now there’s data that corresponds to a spectrum of objectives, such as better risk management or driving capital to more impactful causes. Making sense of ESG data is a powerful tool for advisors looking to achieve personalization at scale.

11:03 – An Issue of Trust

One major challenge is that consumers are skeptical of ESG because of greenwashing, or investments masquerading as sustainable. The industry needs to fight an uphill battle to re-establish trust and communicate about sustainability in a way that investors will understand. Investors want to know what their capital actually achieves, so advisors need to be able to perform transparent sustainability reporting.

13:43 – Improving Sustainability Communication With Investors

Danika’s firm uses a tool to compare portfolios before and after she’s adjusted them according to a client’s values. Tools like these demonstrate the actual impact of a portfolio with an ESG focus by comparing it to a client’s original portfolio, and back up the comparison with the relevant data points.

When it comes to sustainability data, advisors can use impact metrics to demonstrate how revenues associated with sustainable activities contribute to themes like human development, climate action, and so forth, as well as the company governance and operations that contribute to particular areas of impact.

16:24 – Helping Advisors Tell the Sustainability Story

Danika’s firm focuses on “life planning,” which she defines as providing a life for someone that they love, and feel is meaningful today. Instead of following the popular industry model of focusing on investments and retirement, she starts by identifying her clients’ values and goals.

Before she gets to the investing stage, she makes sure she has a firm grasp of her clients’ priorities, which naturally lends itself to ESG conversations. At Morningstar, the Sustainable-Investing Framework organizes ESG motivations along the spectrum of risk management to impact values to help advisors decipher their clients’ preferences.

19:57 – The Most Essential Sustainability Tools

Danika’s priority is connecting with her clients, and so her ideal sustainability tools would improve her ability to have meaningful conversations with clients. While the industry is still working to make ESG data and research accessible to investors, sustainable investing can powerfully meet investor goals, especially because more and more people want to act in response to social issues they see on the news.

Related Content