5 ways to guide clients on ESG and impact investing

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Environmental, social and governance (ESG) investing has boomed in popularity over the past few years as clients seek to align their investments with their values and promote positive change in the world. But more recently, ESG investing hit a serious roadblock, facing political backlash and even laws banning state officials from investing public funds based on the criteria. 

The tides turned quickly. As recently as 2018, BlackRock CEO Larry Fink highlighted the importance of socially conscious investing in his annual letter to other CEOs. “Society is demanding that companies, both public and private, serve a social purpose,” Fink wrote. “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

His statement led investments to flood into ESG funds, which promised to funnel the cash toward corporations that benefited — or at least didn’t harm — the planet and humanity. 

Read more: 3 reasons ESG is still crucial to wealth management

Only a few years later, ESG investments became a political hot topic, with many investors pulling money out after right-wing politicians denounced the funds. Still, many ESG investments have remained highly profitable. Over the past decade, the top 20 sustainable funds have garnered an average yearly return of 13.57%, according to Morningstar Direct. In the past 12 months, their average gain was 18.29%.

“It’s a fallacy that sustainable investing underperforms,” Peter Krull, director of sustainable investments at Earth Equity Advisors, recently told Financial Planning’s Nathan Place. “The reality is that any quality sustainable fund is going to be competitive with any traditional benchmark.”

For financial advisors, one way to shore up authority when advising clients on socially responsible investing (SRI) is by becoming a chartered SRI counselor (CSRIC). This designation is overseen by the College for Financial Planning (a Kaplan company) and developed in partnership with US SIF, The Forum for Sustainable and Responsible Investment. CSRIC trains financial advisors to advise clients on socially responsible and impact investing, according to Jennifer Coombs, who created the original course for Kaplan and has instructed for it and updated the curriculum several times over the years. 

Read more: Can ESG come back from the dead? 

Many who earn their CSRIC designation are already experienced financial advisors and certified financial planners but want to learn more about sustainable investing or ESG, Coombs said, adding that the CFP curriculum does not tend to have much information on climate and environmental concerns. 

“I would love it if the CFP actually incorporated some of the climate considerations in insurance — that’s a huge one that I wish would get brought up more often,” she said. 

As of December 2023, 1,315 students had enrolled in the program since 2018, and 1,055 of them graduated with the CSRIC. 

“That 300 or so difference is largely from college students (from Georgetown and Denver University primarily) who have taken the CSRIC as an elective,” Coombs said in an email to Financial Planning, adding that not all students sit for the final exam. 

What other ways can your firm catch up on the fast-changing world of impact investing? Read more below on the latest strategies, news and methods. 


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