New State Street tool helps advisers determine if clients want ESG investing

Asset manager hopes the Values Discovery Tool aids advisers' conversations about new investment strategies

Oct 2, 2018 @ 12:10 am

By Ryan W. Neal

State Street Global Advisors has a new digital tool that gauges a client's potential interest in environmental, social and governance investment strategies.

The asset manager hopes its Values Discovery Tool will address what it says is a gap between consumers' interest in ESG investing and advisers' ability to provide it. According to research State Street is releasing Tuesday with the tool, half of investors want their adviser to speak to them about ESG investing, and 59% believe it's important to invest in companies trying to make the world better.

(More: BlackRock, Thomson Reuters launch new diversity and inclusion ETF)

But many advisers still aren't talking to clients about ESG as a potential investment strategy, said Mirtha Kastrapeli, global head of research at State Street's Center for Applied Research. Investors currently in an ESG strategy learned about it through their own research.

"[Advisers] are reluctant, they do not know how to start those conversations," Ms. Kastrapeli said. "The purpose of this tool is to break the ice."

Like the software used by advisers to determine a client's risk tolerance or financial goals, the Values Discovery Tool provides an online questionnaire. Ms. Kastrapeli said the questionnaire is available for free on State Street's website and can be completed in five minutes. It generates a report for the adviser showing whether the client is indifferent, interested or an advocate for ESG investing.

The report also shows how clients compare to their peers and how important individual issues are to the client to help the adviser know how to tailor an ESG strategy. Though the tool doesn't recommend specific products or strategies for the adviser, it opens the door for new, engaging conversations with clients, Ms. Kastrapeli said.

One reason advisers haven't been proactive in reaching out to clients is that they are still figuring out exactly how to talk about ESG investing and offer it in a portfolio, said Sam Miller, senior investment strategist at RIA Signature Estate & Investment Advisors. Advisers and clients have been confused by the web of terms to describe socially responsible investing, he said.

"Leave it to our industry to make things really confusing," Mr. Miller said. "We see this with every type of new strategy to come out."

Seeing a lack of products on the market, SEIA launched its own model portfolio consisting of socially conscious ETFs and mutual funds.

Mr. Miller said he loves the idea of a digital tool to help determine what sort of ESG product a client would be interested in.

"If I feel like my portfolio is tied to my personal values because of this process I went through, that's a portfolio I'm going to stick with," he said.

(More: InvestmentNews debuts impact investing documentary at the UN)

Brie Williams, head of practice management at State Street Global Advisors, said the firm's research indicates there's a strong business case for advisers initiating a conversation about ESG, even if clients are "indifferent" to it.

Sixty-nine percent of ESG investors said it helped manage volatility, and 54% cited lower downside risk as a reason to incorporate ESG investing, according to State Street's research. Ninety percent who worked with an adviser on ESG said they were "satisfied" or "extremely satisfied" with the investments.

"It's clear that this is not about a trade-off, performance is paramount," Ms. Williams said, adding that improvements in how companies report ESG data are enhancing how the information can be used to rate investments. It's an opportunity for advisers to increase client satisfaction and engagement while improving returns.

(More: TD Ameritrade adds socially aware portfolios to retail robo adviser)

"More importantly, when we look at the track record of showing that ESG strategies have the potential for better risk-adjusted returns than conventional strategies, it's hard to ignore," Ms. Williams said.


What do you think?

View comments

Upcoming event

Sep 24


Diversity & Inclusion Awards

Attend an event celebrating diversity and inclusion as well as recognizing those who are leading the financial services profession in this important endeavor. Join InvestmentNews, as we strive to raise awareness, educate and inspire an... Learn more

Most watched


How the 2020 elections could impact ESG investing

Joseph Keefe, president of Impax Asset Management, on the elections and how advisers can build a bridge to the next generation of clients with ESG investing.


How advisers can be a gamechanger for women investors

Why women defer to men when it comes to finances and how advisers can combat this phenomenon and make a difference for female investors, according to Heather Ettinger, founder and CEO Luma Wealth Advisors.

Latest news & opinion

Charles Schwab reportedly in talks to buy USAA brokerage, wealth management business

The deal would net Schwab roughly $100 billion in new assets.

Advisers scramble to help retirees navigate looming Fed rate cut

The Fed's first interest-rate cut in a decade has advisers warning against chasing the bait of risk over safety.

CFP Board to announce possible delay of new fiduciary standard

Organization's CEO confirms meeting with Edward Jones, says broker-dealer still considering how to move forward.

Departure of Alexander Acosta could slow DOL effort to revise fiduciary rule

Acting secretary Patrick Pizzella will have to make political decision to move ahead.

SEC member Peirce to brokers: Talk to us early, often about Reg BI implementation problems

She's willing to advocate for additional compliance time if firms have made a good faith effort.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print