How to Address Common Objections to ESG Investing

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Is this new socially aware investment strategy all it’s cracked up to be?

Environmental, social, and governance (ESG) funds, are becoming an increasingly popular form of investing. Set up as a social initiative by the United Nations about 20 years ago, ESG funds show no signs of slowing down their expansion. In fact, they are expected to become a $53 trillion dollar industry by 2025, but are ESG funds truly all they promise to be? Not everyone is convinced.

I will be share three common objections to investing in ESG funds I often see from clients and how advisors can best address those concerns and give reassurance.

True impact

One of the major concerns many investors have with ESG funds is whether they create a positive impact or if they just look good on paper. As performative activism has become a larger topic of discussion over the past few years, some clients have concerns that ESG funds are just another version of that. As advisors, however, it is our job to spell out exactly what each ESG fund a client has an interest in supports as it relates to their wealth management.

Trust from clients is the most important thing we have. Therefore, using that trust to make investment decisions easier for clients is vital. Not all ESG funds are equal, and it is the job of the wealth advisor to distinguish between the funds that are true to their mission and ones that are less impactful.