Chicago-based Aaron Wealth Advisors is convening an “Impact Advisory Board” to spur discussion on how to increase advisor opportunities about environmental, social and governance (ESG) funds, the firm announced today.
The board is the most recent step toward the long-term goal of making Aaron Wealth “the preeminent advisor for those looking to leverage their wealth to make a positive impact,” according to CEO and founding member Gary Hirschberg.
“This has been a particular mission of mine since launching an independent registered investment advisor to help clients who would like to align their investments with their values and a sustainable future,” Hirschberg said.
Securities in ESG funds can be screened for their environmental impact, as well as how they fare on social and governance factors (for example, funds may consider how employees are treated in a particular company). Advisors may forgo investing in funds with securities that have a high-risk level pertaining to ESG factors or might exclude certain types of stocks (though how best to conduct ESG assessment remains a complicated question).
In addition to Hirschberg and Bill Andrakakos from Aaron Wealth, the board will consist of six volunteer members, including Ethic CEO Doug Scott; Kimberly Venable, Business Development at Addepar; Jennifer Rhodes, a partner with Ice Miller; and Rev. Joseph L. Morrow, the Pastor at Fourth Presbyterian Church of Chicago. Dynasty Financial Partners Chairman and co-founder Todd Thomson, and Nick Gerace, an SVP of Investments at Dynasty, will also be on the board (Aaron Wealth is a member of Dynasty Financial Partners’ network).
Hirschberg said the group would hold quarterly calls to discuss issues pertaining to impact investing, including particular investment opportunities as well as broader industry trends. Aaron Wealth, which launched in September of last year and now has more than $600 million in assets under advisement, offers a platform highlighting impact-minded ESG investing opportunities, consulting services for individual clients interested in impact investing, and consulting services for foundations, endowments and nonprofit institutions seeking ESG opportunities.
Advisors may be more open to discussing (and recommending) ESG funds with clients, according to a recent survey by Nuveen. According to the report, 51% of advisors spoke about such portfolios as potential investment options with clients, a 10% jump from 2017. Also, 17% of advisors “felt negative” about ESG funds this year as opposed to 28% two years prior. A Morningstar report from February found that ESG funds continued a six-year run of higher annual net flows in 2018, with assets under management in the ESG subset totaling $161 billion.
But concern about the rise in ESG investing remains; in a June speech at the American Enterprise Institute, Hester Peirce, a commissioner at the Securities and Exchange Commission, said companies risk being unfairly critiqued during an ESG assessment. She argued that negative assessments could be tantamount to pinning “scarlet letters on allegedly offending corporations without bothering much about facts and circumstances and seemingly without caring about the unwarranted harm.”
Additionally, many portfolios including an ESG mandate were actually "repurposed" without any substantive changes. While funds’ prospectuses might be amended to highlight the use of ESG criteria, many of these portfolios continued to be managed without any additions or subtractions of included securities. This can have a pronounced impact on the perception of ESG funds; while Morningstar found the total AUM in ESG funds was $161 billion, it also noted that $72 billion of those assets were in repurposed funds.