Blog Article

Breaking Down the Barriers to Sustainable Investing

Sea turtle release on Phuket island. Thailand
Frank McLaughlin

By Frank McLaughlin, Wealth Advisor CFP®, CSRIC®
Published On 04/13/2021

Wow—2020 was a year unlike any that we have ever experienced. In addition to a global pandemic, events throughout the year exposed many causes that need great support. At Merriman, we are about much more than just the numbers. We aim to have a deep understanding of our clients in order to help them incorporate their values in all aspects of their lives. This led to us having conversations with families about climate change, social issues dealing with race and gender, how to help neighbors and struggling communities, and how to make individual voices heard by large corporations and governments, amongst many other important topics. During the year, did you feel sad, confused, shocked, or overwhelmed by any of these? I know that I sure did, so you are not alone. There is hope, and you can take action in ways that you may not have previously considered. It doesn’t take a large financial or time commitment. You can incorporate your values and support causes through sustainable, responsible, and impact (SRI) investing. Equally important, you can implement an SRI strategy without having a negative impact on your investment returns or retirement goals. It may even lead to the opportunity for outperformance. I want to use this article to break down the barriers to sustainable investing.

It is helpful to first look at some data. In September 2019, Morgan Stanley conducted a study with 1,000 individual investors that they surveyed in two-year increments starting in 2015. Then they published the white paper Sustainable Signals: Individual Investor Interest Driven by Impact, Conviction and Choice. I want to take a moment to highlight two graphs from that white paper:

 

 

Chart 1: Interest in Sustainable Investing

Source: Morgan Stanley, Sustainable Signals white paper, 2019.

 

 

 

Chart 2: Perceived Barriers to Adoption

Source: Morgan Stanley, Sustainable Signals white paper, 2019.

 

The first chart shows that there is a significant interest in sustainable investing, and that interest continues to grow. The second chart shows the perceived roadblocks that prevent investors from choosing sustainable funds. This explains why currently the actual implementation and use of sustainable funds is much lower than the interest levels show. Below are the reasons why those perceived barriers shouldn’t stop you.

 

I’d like to share a story to address the investment performance roadblock. In 2007, I went to Costa Rica as part of a school group called The Eco-Explorer’s Club. Our mission for the trip was to protect sea turtles from poachers and predators during the turtle’s nesting season. The trip was a success, and it was one of the greatest things I have ever been a part of. I remember being filled with so much joy that we had made a positive impact for the wildlife there and also for the wonderful people of Costa Rica. Tourism intended to support conservation efforts is a large part of their economy and provides many jobs. That is when I first made the connection that it is possible to simultaneously support planet and profit. The best of both worlds. Investment funds are able to achieve this as well, as companies increase their revenue by adopting sustainable practices, cutting costs, and listening to client demands.

 

The next roadblock is thought to be lack of investment products. That was true at one point in time, but it is no longer the case. There are hundreds of publicly traded mutual funds and ETFs available that thoroughly integrate environmental, social, and governance factors into their investment processes and/or pursue sustainability-related investment themes and/or seek measurable sustainable impact alongside financial returns. We are big fans of the DFA Sustainability Funds.

 

The third and fourth roadblocks go hand in hand. It is true that it requires time to understand sustainable investments and to stay current. That is why there are professionals such as us to help. You don’t need to do this alone. We are here and available to help you get the best plan in place. You can schedule a conversation directly on my calendar by clicking HERE.

 

After reading this article, I encourage you to click the link above for a virtual coffee chat or to forward this article to a friend who may be interested. Thank you.

 

 

Reference: https://www.morganstanley.com/content/dam/msdotcom/infographics/sustainableinvesting/Sustainable_Signals_Individual_Investor_White_Paper_Final.pdf

 

Disclosure: The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Merriman cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Merriman does not provide tax, legal or accounting advice, and nothing contained in these materials should be relied upon as such.

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Frank McLaughlin

By Frank McLaughlin, Wealth Advisor CFP®, CSRIC®

Frank joined the Merriman family in 2013 because he’s passionate about helping families get everything they want out of life. He understands firsthand how difficult it is for many people to invest the time that is necessary to maximize wealth assets and enjoys helping busy working families and professionals focuses on intelligent financial decision-making so they can stay focused on doing what they love.

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