End of Year Notes
From the Archive: Talking Sustainable Investing at Holiday Parties
Have a safe, healthy, and prosperous 2022!
Author’s Note: No holiday parties for us this year because of the Omicron variant, but I wrote this back in 2017 and I think it still applies today. All previous posts on The ESG Advisor are available in the archive.
Attending some non-work holiday parties this year, I had several great conversations about sustainable investing. None of them were with Millennials. All were with friends or relatives who are investors and work with financial advisors. I assume they’d all be considered mass-affluent investors:
- Linda is in her early 60s, works at a fintech firm, married to an architect, and is actively locally in non-profits and several progressive causes.
- Jim is retired, in his 70s, and very happy with the results his financial advisor has generated for him and his spouse.
- Alex is an attorney in his 40s who is managing partner of a small-to-midsized law firm.
- Finally, there’s Kathy, a relative in her early 50s, a non-professional worker but a diligent saver and investor, whom I think voted for Trump but I don’t know for sure because, well, I just haven’t wanted to go there with her!
Sustainable investing resonated with all four.
Here’s the gist of how I described it to them:
It’s about investing with an awareness of the impact that environmental and social issues like climate change and gender equality can have on a company’s financial success, and of the impact that companies have on these issues in society.
It’s about how companies govern themselves to take into account the environment, how they treat their workers and oversee their supply chain, and the impact of their products.
These are the types of companies more likely to survive and prosper over the long run, so they’re good investments.
And investing in them also sends a signal because you are, in effect, voting with your dollars in favor of more responsible corporate behavior and a more sustainable global economy that works for more people.
Investing, Linda told me, is something she feels like she “has to do”, but isn’t happy about it because she “doesn’t like big companies” and certainly doesn’t like having to depend on investing in them to save enough to retire. But after we talked for a while about sustainable investing, she did a 180. The idea that she could direct her investments to better companies overseen by asset managers who would engage those companies on ESG issues was incredibly appealing to her. She never even asked about performance.
Jim, on the other hand, is a contented investor. He was clearly pleased with the way his existing investments have performed, with his financial advisor and, overall, with the quality of his retirement that’s being funded by his investments. But I also thought, correctly, that sustainability issues may be important to him, especially as his long-term focus turns to his grandchildren and the quality of life they can expect. Jim was so intrigued by the idea that he asked detailed questions on how he could begin transitioning at least some of his assets towards sustainable investments and told me he is definitely going to bring up the topic with his advisor at their beginning-of-the-year check-in.
Alex has most of his assets in his firm’s 401(k) plan, which he also has some responsibility for as a managing director of the firm. Our conversation had more to do with making sustainable investment options available to enhance the attractiveness of the plan to employees. He was especially interested in hearing about the high levels of interest in sustainable investing among women and Millennials, because he is the oldest attorney at the firm and a majority of its employees are women.
Finally, there’s Kathy, whom I’d label an economic populist. She is distrustful of “giant corporations”, like Linda, but by contrast, is proud of herself for being a diligent saver and knowledgeable investor. She already knew something about sustainable investing and saw it mainly as a way to reward companies that treat their workers fairly. She asked me directly to give her recommendations for sustainable funds.
Here are my takeaways from these conversations:
- Sustainable investing resonates with those who may be otherwise alienated from investing because they distrust “giant corporations”, potentially giving them a way to connect in a meaningful way with their investments and, in the process, making it more likely that they’ll reach their financial goals.
- Sustainable investing resonates with those who would like to take a stand in favor of greater corporate social responsibility, which I suspect spans a greater range of investors than we think.
- Sustainable investing resonates with older investors, not just Millennials!
- Sustainable investing resonates with 401(k) plan decision-makers as a way of improving the benefits a firm can offer to younger and female employees, who would appreciate — and use — sustainable options if they were offered in the plan.
- Sustainable investing is a topic that people are interested in discussing, so don’t be afraid to bring it up! And don’t be surprised when more of your clients bring it up.
- In this small sample of conversations, no one brought up the concern that sustainable investing hurts performance. And what resonated was the idea of having an impact with their investments.
Happy New Year and thank you for reading The ESG Advisor!
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