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SRI Is More Than Just Choosing a Generic ESG Fund

If you’re not talking with your clients about socially responsible investing, they’re going to find someone who will.

It happens all the time. We get an email through our website’s Contact Us form that says, “I love my current advisor, but every time I ask them to invest more responsibly, they come up with some excuse why they can’t do it or that it won’t make any money.” In fact, we are talking with a prospect who recently inherited assets he would like to invest responsibly. We’ve found it is not uncommon for inheritors to have different investing values than their parents or grandparents. In this case, the advisor attempted to convince the prospective client that they could “add in” responsible investments to his current portfolio. After speaking with our team and doing some of his own research, the investor realized his advisor would be using generic ESG funds, and this “halfway” approach wouldn’t work because he wants his all his investments to have a positive impact. Once this prospect confirms he wants to work with us, we’ll help him transfer his assets and help him do what his previous advisor refused: align his investments with his values.

More investors than ever are interested in SRI—sustainable, responsible and impact investing. In fact, according to a recent Morgan Stanley Sustainable Signals White Paper, 75% of individual investors are interested, and as many as 86% of millennials expressing an interest in sustainable investing. As an advisor, if you’re not talking with your clients about SRI now, they’ll be talking to me about it soon.

I’ve been specializing in SRI for nearly 18 years. What I’ve learned over that time is that most SRI-oriented clients don’t want to simply be less bad, they want to be intentionally positive in their investing. It’s not enough to reduce their exposure to ExxonMobil—instead, they want to eliminate them, and for you to buy First Solar in its place. Because SRI has never been about picking the latest ESG ETF from Blackrock. If your clients are asking for it, they’ll see through the greenwashing as soon as they get their first prospectus or annual report from the fund manager, since odds are they’ll see ExxonMobil instead of First Solar.


I spend a lot of my time educating investors and advisors about the difference between ESG (environmental, social, governance) and sustainable investing. They are not the same thing. In a recent article, I wrote, “ESG metrics are important, but you cannot passively rely on them to create a positive end result portfolio.” ESG is simply research metrics—there’s no thought or intention to the data. But a sustainable portfolio has intention and asks the question, “what kinds of companies do we want to own and which ones will be leading us into a new, cleaner, and more sustainable economy?”

So, as an investment advisor, do you have the time to conduct the necessary due diligence to adequately distinguish sustainable portfolios from the greenwashed ESG ones? Do you know the industries and companies that are pushing forward into the new economy? I often say you can’t invest in the future by looking in the rearview mirror, but that’s what we are doing by investing in ESG index funds based on traditional indexes.

And how are you communicating sustainable investing intricacies and the new economy with your clients? It seems like every day I’m seeing a new company going public or a legacy company shifting their business in a new, more sustainable direction. Is it enough to just buy Tesla? Of course not. What about battery technologies, green building and biotechnology? Isn’t a healthier society a more sustainable one? Absolutely.

The Solution

You can invest responsibly for your clients without defaulting to the generic, less-bad, ESG portfolios by Blackrock. Companies such as Green Alpha, Trillium, and Vert have sustainable funds that are looking at the new economy and intentionally creating positive-impact portfolios. It’s why we created our Green Sage Sustainability SMA – to give advisors the ability to invest their client’s assets responsibly. 

You’ve worked hard to develop relationships with your clients, and I don’t want to see you lose that connection because you’re stuck in a traditional investing mindset or simply don’t have the time to conduct adequate due diligence. The statistics don’t lie—if you’re not talking with your clients about SRI, they’re going to talk to me or another SRI-focused advisor. And with the impending wealth transfer, even more assets are expected to flow into responsible investing, making this an ideal time to prioritize your approach.

I don’t want your clients, but I would love to help you keep them by managing your SRI assets. By outsourcing your SRI portfolio, you maintain the strong bonds you already have with your clients and let the SRI experts do what they do best—invest for the new economy.


Peter Krull is CEO of Earth Equity Advisors

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