Creating your ESG investment roadmap

Partnering with your advisor to align your portfolio with your values

The increasing popularity of values-based investments and their place in your portfolio

As environmental and social issues continue to capture the nation’s attention, an increasing number of my clients have become interested in investing more responsibly. In fact, in a recent survey, 85% of individual investors have expressed an interest in sustainable investing.1 If you’d like to incorporate values-based investing into your family’s financial plan, consider the following insights I’ve gained working with clients to transform their goals and values into ESG investment strategies.

Aligning your investments with your personal values certainly makes sense but there are a few unknowns to explore when examining environmental, social and governance (ESG) investing options.

Three ESG investing questions that the majority of my clients want addressed are:

1. Can ESG investments offer competitive returns compared to more traditional options?

2. Can I realistically measure the social impact of my ESG investments?

3. And most importantly, who is best equipped to help put an effective ESG investment plan in place?

To help shed some light on the benefits of ESG investing and how it might fit into your investment strategy, I’ll jump right in and address these three issues.

Defining an ESG investment

In order to be sure clients and advisors are on the same page, it’s wise to have a clear definition of ESG investing from the outset. There are a few different interpretations of the term within the investment community. For today’s discussion, I’ll use a high-level characterization of ESG investing as a values-based approach, or investing that aligns the objectives and holdings of your portfolio with your personal or organizational values. Simply stated, matching what you care about with your investment portfolio.

When working with clients, I like to be sure we discuss the two facets that comprise their values. Understanding the negative societal impacts that each client would like to see minimized such as fossil fuel extraction/production as well as the positive impacts clients would like to see more of, such as respect for the environment or diversity in the workplace.

As the nuances of your values are more clearly understood, an advisor can begin to map out an ESG investment strategy that truly represents your beliefs as well as your financial goals.

Can ESG investing offer you competitive returns?

As you might expect, when discussing ESG investing with clients, questions regarding potential returns are at the top the list. Of course, it can be challenging to make investment decisions strictly aligned with your values if you suspect you may be leaving potential returns on the table. The good news is, there is compelling data indicating that organizations pursuing ESG strategies are likely to outperform the market2.

Adopting ESG issues has also been found to correlate with lower stock price volatility. Discussing these findings with clients has helped wary investors become more comfortable adopting ESG strategies, knowing that “doing good” does not stand in the way of doing well.

Understanding the social impacts of your ESG investments

As a client, once we’ve discussed any potential performance concerns, addressing the current metrics used to illustrate societal impacts is a logical next step. Advancements in the measurement of societal impacts allow ESG investors to more precisely understand how their investments are making a difference in the world.

Although there isn’t a singular definition of societal impacts, top ESG categories include tobacco, conflict risk, human rights transparency, and anti-corruption3. Using each client’s value set as a guide, advisors can pursue investment opportunities that provide tangible results associated with those values, such as the amount of carbon emissions saved or the percentage of women promoted internally at an organization. There is more good news on the metrics side. As interest in ESG investing grows, the measurement of ESG impacts will become more precise and more accessible for investors.

Working with your advisor to prioritize your values

Once my clients have articulated their values, we work together to prioritize those values and begin to translate them into ESG investment opportunities. Like every investment discussion, understanding clients’ risk tolerance is an important step in assessing ESG investments.

Working together, we establish and prioritize potential investments as they relate to values, risk as well as potential gains. We then chart a course with those guidelines in mind. From there, my SVB Private colleagues and I actively manage client portfolios to ensure investments remain aligned with the values clients have shared with us.

Leveraging technology to execute your ESG investment plans

Once the initial investments are established, we employ advanced investment tracking software to allow clients and advisors to quantify portfolio progress. This innovative tool offers real-time views of the client’s entire portfolio, so advisor/client consultations are not held up by the production of reports or charts. Having access to an intuitive online tracking platform gives clients more time to ensure their ESG investment strategies remain aligned with their values and goals.

Our system provides holistic views that allows advisors to give investment insights on accounts held by multiple institutions. Clients are also able to monitor day-to-day finances and have the data needed to make more informed decisions as time progresses. In additional to facilitating a more productive relationship with your wealth advisor, we’ve found this technology allows for more streamlined collaboration among outside specialists such as accountants and attorneys.

Putting your ESG plans to work with our team of experts

When helping clients pursue their financial goals, SVB Private employs a diverse team of professionals to bring the custom-tailored services of a boutique wealth management firm to life. When it comes to execution, we provide the resources and technology of a large financial institution.

As a SVB Private client, you have access to a full spectrum of wealth, trust, and banking services. If you have been looking for a meaningful relationship with a wealth advisor who has the experience, expertise and resources needed to assist you with new opportunities such as ESG investing, consider SVB Private.

Ash Daggs, CFP®

Ash Daggs serves in the role of Private Wealth Advisor, responsible for delivering comprehensive strategies and solutions for high-net-worth clients. He is based in San Francisco.

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