What I'm Advising My Clients About Investing in Socially Responsible Companies

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There’s been a significant rise in ESG (Environmental, Social, and Governance) investing. According to a study conducted by Morgan Stanley, more than half of individual investors plan to increase their allocations to sustainable investments in the next year. Thus, more of my clients are interested in having their portfolios reflect their values and interests.

Attending recent summits has opened my eyes to the social implications of investments such as climate control, political affiliations, and DEI (Diversity, Equity & Inclusion). This gave me the awareness to educate my clients on the social impact of investing. Here’s what I’m sharing with them.

Key Takeaways

  • Rising interest in ESG investing reflects a shift towards aligning portfolios with personal values, driven by awareness of social, environmental, and governance impacts.
  • The Federal Reserve issues principles for climate-related financial risk management for large institutions. 
  •  Educating clients on ESG criteria is important, as it provides opportunities for portfolios that support ethical values while also aiming for financial growth.

Many individuals are unaware they can create portfolios reflecting their social, environmental, and political values. In fact, 22% of Americans said they are “not too familiar” with ESG, while 40% are “not familiar at all.”

Many also don’t realize that portfolios can be aligned with political views by investing in companies that back a respected party. For example, to align with your social values, there are Exchange-Traded Funds (ETFs) that exclude prison stocks from the three major indexes: DOW Jones, S&P 500, and NASDAQ.

What I’m Telling My Clients

Educating clients on investing in Environmental, Social, and Governance (ESG) criteria is vital for their personal knowledge. ESG investments focus on companies with favorable environmental practices, social responsibility, and strong governance. By highlighting long-term benefits, financial stability, and ethical considerations, advisors can guide clients toward responsible investments that align with their beliefs and financial goals.

Pushback Against ESG and DEI

Some advisors opposing ESG express concerns that it conflicts with their duty to manage client assets responsibly. Pushback on ESG and DEI often stems from a lack of understanding of its mission and long-term benefits.

In fact, according to an analysis by Mckinsey & Company, financially successful companies that integrate ESG into their growth strategies outperform their peers. Thus, by integrating ESG with socially responsible returns, we can address global challenges while having resilience in markets. 


According to an analysis by McKinsey & Company, companies that integrate ESG principles into their growth strategies have improved their financial performance.

The Bottom Line

The surge in interest in ESG investing represents a significant shift in the investment landscape. More clients should be educated on aligning their portfolios with personal values and social agendas. Continuous learning empowers me to better inform clients of the profound impacts of their investment choices. By understanding and incorporating ESG criteria, we can create portfolios that not only aim for financial returns, but also contribute positively to societal and environmental outcomes. It’s about balancing and aligning profits with values.