A Simple Pledge Helps Advisors Deliver What Clients Really Want

By Lisa Wirthman

The rise of sustainable investing represents an opportunity for everyone: clients, advisors and the communities in which we all live and work. 

So why aren’t more advisors sharing this opportunity with their clients?

Over the past three years, the global assets of sustainable index funds have more than doubled, reaching $250 billion, according to a new Morningstar report. Yet while New York Life Investment research shows that 53% of investment clients describe themselves as values-driven—and that half of that group is open to sustainable investing—many advisors still are not discussing the topic with clients.

To change that, New York Life Investments is offering its advisors a friendly challenge. For every sustainable investing conversation that advisors start with their clients, New York Life Investments pledges to offset one ton of carbon—with an ultimate goal of 10,000 tons. 

“Ultimately, that means having 10,000 conversations,” says Ian Forrest, global chief marketing officer at New York Life Investments.

Closing The Advisor-Client Conversation Gap

The conversation gap between investors and advisors results from two factors: education and inspiration. Advisors need a thorough knowledge of the environmental, social and governance (ESG) investing space. They also need to be sufficiently inspired to discuss ESG investing with their clients. 

To increase opportunities for education, New York Life Investments launched the United States version of its online CANDRIAM Academy in June. The accredited training platform is free to access and provides a virtual education in sustainable investing. 

While the U.S. has traditionally lagged behind Europe in adopting sustainable funds, that trend is changing. The U.S. now accounts for 20% of global sustainable fund assets, up from 13% three years ago, according to a Morningstar report.

Since the launch in June, more than 600 advisors have registered for the CANDRIAM Academy, which has been a pioneer in the ESG investing space over the past 20 years. 

By now adding the sustainability pledge, New York Life Investments hopes to inspire advisors to share their new knowledge with their clients. The pledge program starts on Zero Emissions Day, September 21, 2020, and runs through October 23, 2020. During that period, every new advisor-client conversation about sustainable investing will catalyze a sizable offset on New York Life Investments’ part.

The sky is the limit.

“Our core belief is that if you have 10,000 conversations that are being registered, there are probably multiples of those conversations that are actually happening across advisor practices,” Forrest says.

The Myth: Sustainability Underperforms

To keep those conversations going once they start, New York Life Investments will also need to help advisors address outdated myths to the effect that sustainable investments don’t perform as well as more traditional investments do. 

The reality is that sustainable investors don’t have to trade performance for doing good by society. For the first six months of 2020, all 26 ESG index funds outperformed their conventional index-fund counterparts, according to Morningstar’s July year-to-date data.

If, early on, there was suspicion in the advisor community that sustainable investments would underperform, advisors now understand that they can be significant growth drivers for many of their clients.

New York Life Investments research also found that the longer an advisor has a relationship with a client, the less likely that advisor is to introduce the relatively new topic of sustainable investing.  

“Our hypothesis is that the longer the relationship, the more risk-averse the advisor becomes,” Forrest says.

The bottom line is that increasing the volume of client conversations about sustainable investing solutions holds great value. The discussions help advisors to strengthen their bonds with both existing and new clients—and can subsequently expand their business opportunities. 

And if advisors can start to share their understanding of sustainable investments with their colleagues as well as their clients, the volume can continue to grow. 

Sustaining The Conversation

The sustainable investing pledge is just the start of a continuing initiative and could potentially extend beyond the initial five-week program. 

“We are excited about the idea of demonstrating leadership and really bringing some new ideas to advisors in this space,” Forrest says. 

Lisa Wirthman is a journalist who writes about business, public policy and women’s issues.