How do you incorporate environmental, social and governance (ESG) investing into your practice?

This article appears in the Fall 2020 issue of Advisor’s Edge magazine. Subscribe to the print edition, read the digital edition or read the articles online.

Mac Mekawi, Financial advisor, Edward Jones, Toronto

We start by understanding what’s most important to clients — for example, whether they want to invest only in companies that share their environmental or social values. We also discuss the potential tradeoffs of sustainable investments, including funds that have a narrow focus, resulting in insufficient diversification.

We then incorporate clients’ ideals into a personalized strategy. For clients who want total control over where their money is invested, we help them select a basket of individual securities. For most clients, mutual funds and ETFs are an efficient way to incorporate ESG criteria into their diversified portfolios.

Donna Schneider, Vice-president and investment advisor, National Bank Financial, Regina

We are starting to dig deeper into companies so we can understand how they’re adopting ESG processes. National Bank has a research department that provides us with a lot of information, and my team does additional research on specific areas and companies. If we can’t find sufficient information, then we talk to the analysts about a fund or mandate because they’ve spoken to the companies directly. We want to understand what the companies’ involvements are so we can accurately convey that to our clients.

I’ve made a point to bring up ESG investing with clients instead of waiting until they ask me. I want to know if these practices are important to them — and to what extent — so I can provide them with that alternative.

Gardy Frost, Financial advisor, Arbutus Financial Services, Vancouver

While ESG has been around for a long time and is now in high demand, it’s not well articulated. That means I need to ask hard and specific questions to our investment managers about their ESG processes.

I have a client that’s very interested in climate change. I don’t know a fund off the top of my head that concentrates exclusively on climate change, so I asked fund companies if they have a manager concentrating their efforts in this area. I want to include clients in the conversation so they understand what the fund mandates are and what they’re trying to accomplish, so they know where their money is going. My role is to be a communicator between my clients and the investment options out there.

Maddie Johnson

Maddie is a freelance writer and editor who has been reporting for Advisor.ca since 2019.