How tech tools are expanding access to ESG investing

Experts from Charles Schwab, Merrill Lynch and Fidelity address how advisers can use digital tools to increase investor engagement.

Increased interest in environmental, social and corporate governance investing is forcing tech companies to expand their roster of ESG products as clients continue to ask for investment strategies that align with their values. 

With ESG assets expected to soar to $45 trillion this year, wealth management firms are eyeing new technology partnerships to improve their capabilities, according to tech executives from Charles Schwab, Merrill Lynch and Fidelity Institutional during a panel at the Finovate Fall Digital event on Friday. 

“Investors want to know their investments align with their interests and their adviser can use tech to ensure their portfolio reflects that,” said Charles Schwab’s senior vice president of digital transformation and user experience Sara Tresch. “ Value-based investing has a lot of staying power.” 

Clients want to know that they can tap modern portfolio management tools to customize their portfolios, Tresch said, and advisers can turn to turnkey asset management platforms for the tech tools. 

Merrill Lynch, for one, has taken notice of the heighted demand for ESG-investing, according to head of digital wealth management Kabir Sethi. “ESG-investing proves there is tremendous power in being able to capture and uncover the very specific needs of clients,” he said. “Going into 2021, ESG-investing is even higher on our radar, as far as tech prioritization, than ever before.” 

For Fidelity Institutional, the firm is continuing to look into ways to enhance its partnership with Ethic, a digital asset manager providing sustainable investing portfolios, to help financial advisers offer ESG investing to clients, according to the firm’s head of digital strategy and platform consulting Tricia Haskins. 

Ethic plugs into Fidelity’s brokerage platform so advisers can select separately managed accounts using existing ESG models or build a custom allocation using direct indexing.

Other firms, like UBS Group, have already announced plans to offer sustainable investments to wealth management clients worldwide as the COVID-19 crisis underscores the need for more socially and environmentally responsible financing.

BlackRock, too, recently announced that it would be integrating ESG into all actively managed portfolios by the end of this year.

Moving forward, advisers should note that ESG-investing is just an entry point to progress conversations forward with clients and get them interested in other product offerings, according to Merrill Lynch’s Sethi. 

“We need to keep figuring out ways to leverage technology to get advisers to show clients there is more we can do for them beyond just having a checking account,” he said.  

Schwab’s Tresch concurred, noting the industry is just scratching the surface when it comes to technology and ESG investing.

“People are engaging with their finances more than ever before,” she said. “It’s about using tech to take conversations to the next level and with personalization, advisers can understand people’s intent as well as allocate which digital solutions can help spark those forward-looking conversations.” 

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