The Environmental, Social and Governance (ESG) investing landscape is maturing. We see expansion not only in dollar amounts — ESG investing now represents about 20 percent of total assets under professional management in the US — but also in the development of new policies like the EU Non-Financial Reporting Directive1, which requires 6,000 companies to report ESG information annually.

On the academic front, a growing number of empirical studies show a positive relationship between ESG factors and corporate financial performance. And the industry itself is developing much-needed standards for companies to measure and report on ESG performance.

For individual investors, progress can begin with a single conversation.

Where Do We Go From Here?

Individual investors are coming to the table with varying levels of interest in (and information about) ESG investing. But many are interested. In fact, our 2017 research shows that about one-half of current ESG investors and current non-ESG investors wanted their advisor to communicate more about ESG investing.

Starting the conversation:

1Ask about their values.

Our Values Discovery Tool can help!

2 Focus on ESG as part of their long-term goals

3 Keep updated on the latest ESG trends

Performance Gets Personal

How to Start the ESG Investing Conversation

1 The ESG Investing Enlightenment. State Street. March 2017. http://www.statestreet.com/ideas/articles/investing-enlightenment.html

CHECK OUT THE

VALUES DISCOVERY TOOL

PERFORMANCE GETS PERSONAL

Some may believe that ESG strategies candeliver long-term market outperformance —as 59 percent of individual ESG investors in our survey reported — but are uncertain about what that means for their portfolio today. Some may want to better understand the tools available to measure impact and non-financial performance. And still others may just be getting started; wondering how their investments can be used to support their personal values and causes.

Answering all of these concerns requires open and proactive communication between investor and advisor. In the face of a deluge of reports, research, data sets, strategies and geopolitical machinations, sometimes the best thing to do is go back to the basics.

To help start the conversation, we developed an online values discovery questionnaire intended to gauge an individual investor’s level of interest and overall commitment to various ESG issue groups. By directing clients to this survey, advisors can use the subsequent report as a conversation starter.

Success is Personal

Thanks to the growth of ESG, many investors are looking for more from their investments than just straight financial returns. For instance, our research found that 50 percent of ESG investors say that climate change is a significant factor in their investment decision process. 42 percent are concerned about income equality and gender inequality. Success is increasingly tied personal values, and that may become just as important as returns to clients. In fact, our study found that 75 percent of the individual investors we surveyed said they would be willing to sacrifice better returns to make investments that have a positive social or environmental impact.

This crucial shift means success is no longer measured only by numbers on an account statement — it’s not the alpha or the betaor the standard deviation — it’s about doing well, while also doing good.

No matter what the latest research says, the newest trend is, or even what the experts say, the most important conversation about ESG happens between advisors and clients.

Start a new conversation today.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. Investing involves risk including the risk of loss of principal.

statestreet.com

2237358.1.1.GBL.INSTExpiration Date: October 31, 2019

©2018 State Street Corporation - All Rights ReservedState Street Corporation, One Lincoln St, Boston MA 02111