How to Uncover Your Clients’ ESG Motives

Understanding what draws clients to sustainable investing can help you offer solutions that meet their goals.

Interest in sustainable investing is on the rise. Even though you’re likely talking to some of your clients about sustainable investing, the number of people who want to know more about it might be even higher than you think. FlexShares found that 72% of investors are interested in sustainable and ESG investing strategies, according to a recent survey we conducted — and that interest is shared across people ages 20–85, as well as men and women. 

Yet even with widespread interest, sustainable or ESG investing can still mean different things to different clients. The best way to have productive conversations around the potential role for ESG in a client’s investment strategy is to understand which sustainability issues matter to them — and what goals they hope to achieve. 

These tips will help you get comfortable discussing the whys and hows of ESG investing so you can develop a personalized approach that meets an individual client’s sustainability concerns while driving toward their ultimate financial goals. 

Exploring the common reasons clients choose sustainable investing

An evolution in the way both businesses and investors think about sustainable investing is helping drive demand for ESG strategies. It was once an approach favored by investors with strong ethical or values-based motivations. Now, many investors see the ESG framework as a lens to examine critical business issues that have a material impact on a company’s long-term balance sheet. 

You’ll find clients across this continuum of sustainable investing goals. Some will be inspired to align their investments with their values, such as by avoiding tobacco, weapons, or fossil fuel companies. Others may want to put their money behind companies actively working on major issues like addressing climate change or building affordable housing.  

Survey fielded to 285 consumers that were working with a financial advisor. Each had a minimum of $100,000 in investable assets and a minimum annual household income of $100,000. November 2021.

But many clients — including those who also have ethical motivations — are concerned about sustainability issues affecting the value of their investments. They view ESG as a framework for analyzing investments that could potentially reduce a portfolio’s risk or tilt it toward growth opportunities. 

Ask probing questions

To explore clients’ interest in ESG, ask probing questions about their motivations and objectives. For example, you can provide a series of statements and ask which best describe a client’s thinking on sustainable investing, such as: 

These questions and other conversation starters are available in our questionnaire, “Your Portfolio, Your Preferences: Responsible Investing,” available for download on our ESG site. 

Aligning ESG with other priorities

How clients answer these questions can help you take the next step: Exploring how sustainability goals fit with other investing priorities, such as managing volatility or pursuing growth. 

For example, many clients will want to balance their ESG goals with other financial priorities, such as maintaining a portfolio with sector exposures and a risk profile similar to the market as a whole. These clients may prefer sustainable strategies that screen potential holdings based on ESG characteristics and tilt toward higher-scoring companies, but still maintain similar sector weightings to a broad industry benchmark. 

Others may want to avoid companies that conflict with their values or target companies with a specific theme, such as developing green energy. You can explain to clients that either case could mean taking on idiosyncratic risk in their portfolios, because they may lack exposure to certain sectors of the market or result in concentrations in certain industries or companies. 

Clients will have different preferences for developing portfolios that express their views. The good news is that there are now many different types of ESG strategies available to align portfolios with a client’s sustainability goals and other priorities.

Committing to ongoing conversations about sustainability

Like other financial issues, clients’ views on sustainable investing are likely to evolve over time. Raising ESG considerations during your regular client conversations can put you in a position to address those priorities before clients go looking for someone else to provide that service. 

For example, you likely ask clients each year about changes in their risk tolerance or whether they have new financial goals such as buying a second home. You could include an additional question like, “Has your view around sustainable investing changed since last time we talked?” 

By taking these opportunities to discuss sustainable investing, you will grow more comfortable exploring a potential role for ESG strategies in client portfolios. And as with other financial priorities, understanding the why behind your clients’ ESG goals will help you better pursue the outcomes they want — whether that’s aligning investments with their values, managing risk, or seeking better long-term returns.