Learning to talk ESG with clients

As the appeal of sustainable investing gains more steam with each passing day, financial advisers are starting to scramble to stay ahead of the curve both in terms of understanding the space and communicating the message to clients.

Addressing that issue Thursday as part of the InvestmentNews Global ESG Summit, Victor Orozco, managing partner at Blair Financial Planning, recommended starting by talking to clients about their specific goals and passions around environmental, social and governance causes.

“When it comes time to talk about investment strategies, we ask if they have considered sustainable options; it really is that easy,” he said. “If you don’t bring it up, clients won’t know it’s available, so find a way to create that space and have that conversation.”

Orozco added that one way into the conversation can come while doing something as basic as reviewing a client’s tax returns and paying attention to the kinds of causes and charities they are supporting, and by asking “more qualitative and quantitative questions.”

Jennifer Kenning, chief executive and co-founder of Align Impact, said talking about ESG investing is just an extension of “getting to know your clients at a deeper level.”

[More Global ESG Summit coverage: Democratic-led SEC lets investors determine ESG materiality]

“It’s more natural than most advisers give it credit for,” she said, suggesting that it is often the advisers who are getting in the way of expanding access to ESG strategies by not talking to clients about it.

“Start with asking clients what they care about in the world and why,” Kenning added. “It’s often very personal, and it often has family roots, or something that has occurred. But once you know what’s important to them, then you can look at ways to solve that issue. And do it in your style, however you already lead your client, weave it right in and before you know it, it will become second nature.”

Christopher Knapp, managing director of Robertson Stephens, agreed that it is about “meeting people where they are and understanding that sustainable and green investing are fiduciary issues, not political issues.”

“The greatest opportunity for all of us here is realizing clients are not always paying attention to what’s in their portfolio,” he added.

Patrick Reed, chief executive and co-founder of Yourstake.org, also approaches these conversations with clients with a touch of psychology.

“We recommend going into a behavioral finance situation by asking about their values and what they are prioritizing.”

“If you just present a list of different things to a client, that can be very overwhelming,” he added.

When it comes to breaking the ice on the topic, Knapp subscribes to a historical perspective.

“Context is everything,” he said. “My advice, step back and look at what has happened over the past several decades. Understanding the evolution and context. For traditional investors trained around fundamental investment analysis, learn the G, which usually leads into the E and S.”

Kenning said is also helps to put yourself in your clients’ shoes.

“Ask yourself the same questions you’re going to ask your client,” she said. “ESG investing is deeply personal, so really start with yourself. Understand what you’re talking about. Figure out what kind of semantics and vocabulary you and your firm are going to use and then own that language. This is not a different way of investing; it’s an extension and it’s going deeper by peeling back another layer.”

When it comes to motiving clients to embrace ESG strategies, Orozco said it must start with the “adviser taking the biases out.”

“We have to educate ourselves on the differences,” he said. “Most of the time it’s a values thing, and it speaks to your soul. If you can align clients’ passions with their money you give them the space to have that conversation.”