Until the asset management industry can agree on some standard definitions and practices regarding sustainable investing, the onus will be on financial advisers to look behind the scenes and under the hood of any strategy marketed as incorporating ESG factors.The following are due diligence best practices and tips for avoiding “greenwashed” products.
• Request a meeting with the asset manager’s ESG team to understand their process and where they sit within the company.
• Find out if the firm has a formal commitment or mission statement regarding ESG investing.
• Find out if the firm has dedicated ESG-investment professionals, including portfolio managers and analysts.
• Ask about the firm’s ability to leverage ESG data and analytics in security analysis from a risk perspective.
• Ask about the firm’s policy and track record when it comes to shareholder proxy voting and engaging directly with company management and directors.
Additional practices regarding the data.
• Know the asset manager’s source of ESG data.
• Single-source third-party data is limited and can be stale.
• The next step would be an in-house team developing proprietary ESG assessments.
• The ideal scenario would be for the firm to have active engagement, collaborating dialogue with individual companies.
Examples of resources for screening funds.
• Morningstar.com: Using data from Sustainalytics, Morningstar’s globe rating system provides a historical sustainability score that includes metrics for carbon risk and fossil-fuel involvement. The globe ratings are updated monthly based on the latest portfolio reporting, and consider the trailing 12 months, while weighting recent portfolios more heavily.
• MSCI.com/ESG-ratings: MSCI is expanding its universe of funds that are screened and graded with ESG scores. The grading is on a seven-point scale and provides context as to specific ESG areas where the fund is strong, average and weak.
• FossilFreeFunds.org: Part of AsYouSow.org, this screening tool provides detailed analysis of a fund’s underlying holdings. In addition to a breakdown of fossil-fuel holdings, the site grades funds on factors including deforestation, gender equality, civilian firearms, military weapons and tobacco.
Relationships are key to our business but advisors are often slow to engage in specific activities designed to foster them.
Whichever path you go down, act now while you're still in control.
Pro-bitcoin professionals, however, say the cryptocurrency has ushered in change.
“LPL has evolved significantly over the last decade and still wants to scale up,” says one industry executive.
Survey findings from the Nationwide Retirement Institute offers pearls of planning wisdom from 60- to 65-year-olds, as well as insights into concerns.
Streamline your outreach with Aidentified's AI-driven solutions
This season’s market volatility: Positioning for rate relief, income growth and the AI rebound
