A four-step approach to working with clients on sustainable investing

Advisers should provide a global view and frame conversations around investors' values.

All of us working in wealth management and as financial advisers need to have a global perspective. A tanker wedged in the Suez Canal that sends tremors through global supply chains is a reminder of how small and interconnected the world is today. To be successful, we need to have eyes on investments and economies all over the world.

This global approach perfectly dovetails with our ability to help promote a sustainable future.

Investors should be able to expect greater expertise and guidance on impact investing from advisers who have this global view. Investors can start by asking for conversations that define exactly what we mean by impact investing. On the flip side, advisers should look for opportunities to frame the conversation around an individual’s values. There’s some disagreement on the term in the investment community. It’s been referred to as “social responsibility investing” and “sustainable investing” and as “ESG investing.” Why not take a broad definition? Impact investing is any investment driven by values.

From there, advisors and investors have the opportunity to set goals and take action. Here are four tips I’ve learned for doing just that.


Social and environmental values aren’t always top of mind for investors when talking about their financial plans and goals. That’s what an informed, proactive advisor is for. Taking a customer-centric approach, wealth advisors can frame the conversation, and then listen. We can then offer curated options based on the client’s own set of values. This proactive invitation to clients to discuss values is a little unusual, but it’s important. Even when they are interested in it, many investors don’t initiate discussions about ESG investing because it is a relatively new field. We can open the door for them.

A good place to start is what areas does an investor not want exposure to. When one of our advisors in Minnesota asked a client about this, it opened a conversation about Bank of the West’s own policies against investing in coal-fired electric plants, human trafficking, and a host of other areas. The adviser asked, “Would you like me to tell you more about that?” The client was intrigued and appreciated learning about restrictive finance policies that aligned with their values. For investors unfamiliar with specific ESG criteria, just knowing that they exist can help them rethink their investment strategy.

For investors: Don’t be afraid to broach the subject with your adviser. Impact investing is an increasingly common approach to wealth management. Your advisor may not realize you’re interested in exploring it. Once they do, they should be able to provide you with options for pursuing an investment strategy that aligns with your values.


Once a client’s values are clear, they can and should expect their adviser to get to work determining the best way to adjust their portfolios to reflect them. This could happen through specific diagnostic and analytical tools or another approach to strategically align investments with a client’s ethics and principles.

Advisers can then work with each client to help them invest all or just a portion of their portfolio in values-based holdings that reflect who they are and what they stand for. New impact-oriented investors tend to start with five to 15% of their portfolio in ESG investments. Of course, this depends on the investor, as ESG investing is very subjective.

If an investor decides to proceed, a dedicated financial institution can offer them a curated line-up of mutual funds and ETFs or apply positive and negative screens to any professionally managed portfolios. I like to give clients choices among socially responsible funds that align with their values and are evaluated based on ESG factors, such as climate change, conflict risk, and human rights. Some really exciting options might include enhanced impact investments, which are highly targeted solutions, including special and time-limited offerings, such as purpose-driven structured notes, green bonds, and private funds.


More about that curated line-up of mutual funds and ETFs: Not every fund lives up to the ESG label, so it’s important to strategically and rigorously conduct due diligence. Here’s the recommended process by which my team can select our more than 25 recommended ESG funds:

  • Conduct a landscape assessment of all available funds
  • Select preliminary providers that carry the product we are looking for
  • Analyze each provider’s sustainability or impact philosophy and their product
  • Conduct due diligence on them, and schedule a series of interviews
  • Add product to our recommendations list
  • Pursue continual monitoring and validation of approved products

For investors, the important takeaway here is that an adviser’s recommendations should be well informed. Impact investing is a large enough space that you can make informed choices among many options


Advisers may be anticipating questions from clients about returns on impact investing — and as an investor, you may have a lot of questions. I like to answer these questions with data. This is what informed investors want and need from an adviser. For instance, data on how U.S. sustainable open-end funds and exchange-traded funds continued to break records in 2020, according to Morningstar, increasing in number by 30% over 2019.

During 2020, flows into US sustainable mutual funds and ETFs reached $51 billion, pushing the total of worldwide sustainable assets under management to $1.7 trillion, according to Morningstar. The U.S. inflows were up sharply from 2019, when flows were $21 billion, and nearly tenfold over 2018 when flows were $5 billion.

Investing for impact doesn’t mean compromising your financial objectives. Investment returns have been shown to be similar between sustainable indexes and the broader stock market, according to Morningstar. We find that ESG funds are generally well-managed and tend to invest in companies with CEOs who have the bottom line in mind, not just ESG. But because of their ESG commitments, they are more attuned to the risks of having their product lines boycotted or picket lines in front of corporate offices or not being ranked by either Morningstar, MSCI, or one of the other ratings firms. Quite simply, they are more concerned with due diligence. And that can boost their profitability.

Making a difference doesn’t just encompass lifestyle changes, but changes to where we put our money. As investors, you have the opportunity to help finance a more sustainable world. As wealth management professionals, we have the privilege and responsibility of making that opportunity available and achievable.

Michael Pereira is head of Bank of the West’s wealth management group.