Does ‘ESG’ Mean the Same Thing to You and Your Client?
- ESG investing presents a vast array of products, issues, and terminology.
- Individuals interested in ESG portfolios tend to be focused on values.
- It's vital for financial advisors to be able to understand which values are important to each client, and to be able to meet each client's need with a portfolio that addresses their values.
- The key to finding a great match is knowing which values a portfolio reduces or eliminates and which it does not.
 State Street Global Advisors, ESG Institutional Investor Survey, "Performing for the Future." Survey conducted by Longitude Research in December 2016 to January 2017 of senior executives with asset allocation responsibilities at 475 institutions. https://www.ssga.com/investmen...
 Morgan Stanley Institute for Sustainable Investing, "Sustainable Signals: Individual Investor Interest Driven by Impact, Conviction and Choice." Brunswick Insight surveyed 800 individual investors with minimum investable assets of $100,000 in February 2019. https://www.morganstanley.com/...
 Morningstar Investment Management runs five portfolios in the ESG Asset Allocation series. We used the ESG Aggressive Growth portfolio for this analysis because it holds the highest percentage of stocks. ESG data is far more plentiful for equity assets than for fixed-income ones, so using the highest stock portfolio seemed the best fit to illustrate differences to benchmark.
 The benchmark is composed of 45% U.S. stocks (Vanguard Russell 3000 ETF, or VTHR), 28% international stocks (iShares Core MSCI Total International Stock ETF, or IXUS), 3% U.S. bonds (iShares Core Total USD Bond Market ETF, or IUSB), and 2% cash (SPDR Bloomberg Barclays 1-3 Month T-Bill ETF, or BIL).
 Regarding Animal Testing, the portfolio lowers the number of holdings on this issue, but the asset level as a percentage of the overall portfolio is higher for the portfolio versus the benchmark.
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