by TruValue Labs.
Figure 1 Chart by Morningstar.
Most asset managers know that ESG data are emerging mainstream finance metrics. More than half of global assets today, $59 trillion, are controlled by asset managers who consider ESG factors. The results are there too: thousands of studies since 1970 show a positive relationship between ESG criteria and corporate financial performance.
But investors are even more attuned to ESG than advisors are, which makes ESG savvy a competitive advantage in today’s mnaged money world. Here’s a quick look at why and how investors are leading advisors to ESG:
10. ESG investing interest is greater among millenials and investors of any gender than it is for advisors, as the chart above by Morningstar shows. There’s a major gap to be filled.
9.“Almost three-quarters of investors would be more likely to work with an advisor who could help them make a social impact without sacrificing performance.” — TIAA Global Asset Management
Figure 2 Chart by Bank of America / U.S. Trust survey
8.As seen above, “Impact Investing” interest is growing among women, millennials, Gen X, and the highest-value client accounts, according to a Bank of America survey.
7. …furthermore, “Women are projected to control two-thirds of the world’s wealth by 2020 (according to MSCI), and millennials will increasingly become the world’s decision makers.” — PIMCO
Figure 3 Chart by Morgan Stanley Institute for Sustainable Investing & Bloomberg.
6. As seen in the chart above, the primary factor driving asset managers to adopt sustainable investing practices is client demand, according to a surveyby Morgan Stanley Institute for Sustainable Investing.
5. Bank of America, which is focused on expanding its ESG services for private wealth management, is playing catch up and quickly increasing its reach: “A recent internal study found that 38 percent of wealthy individuals have or are interested in impact investments today, while 17 percent of Merrill Lynch advisors use five or more impact investing solutions to help meet their clients’ needs — twice as many advisors compared to just three years ago.”
4. Active managers must compete with the emergence of passive ESG products: “In 2016, in response to the growing demand for and appreciation of ESG factors in investment, MSCI and Morningstar each launched products to provide investors with assessments of how well the underlying companies in a wide swath of mutual funds perform on ESG issues.” — U.S. SIF
3. Nearly 90% of advisors say most ESG conversations begin with clients; 82% of high net worth individuals say they find ESG investments appealing, as do 88% of millennials. — Legg Mason survey
Figure 4 Legg Mason chart.
2. Schroders Global Investor Study 2016 found that advisers thought ESG considerations were less important than investors: “The biggest disconnect between investors and their advisers was in the UK, the US and Germany. In the UK, the average score for ESG on a 10-points scale of importance was 6.1 for investors compared to 5.4 for advisers. The gap was even wider in the US, with investors marking the importance at 7.3 against 5.5 for advisers.” — Schroders Global Investor Study
1. “An astonishing 61% of family offices are now active or expect to be active in impact investing. Millennials are a key catalyst for this change, but this isn’t just a change led by the next generation. Some 47% of family offices believe that impact investing is a more efficient use of funds to achieve social impact than philanthropy.” — Global Family Office Report
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