It is clear financial advisors need to stay abreast of the changing landscape resulting from climate concerns relating to the companies they invest in and shifting client views and questions. So, here's my quick take on what this means for financial advisors:
Client conversations will change.
Whether clients are interested in changing our economic system for planetary survival or they're just concerned, climate change will increasingly be part of client conversations. It will require advisors to have some understanding of the terminology and how it all relates to companies and investment portfolios. Some of this will be to listen, understand, and allay clients' concerns and fears, and advisors should consider doing so proactively, rather than waiting for questions to come.
Investment options and allocations will change.
Some investors may look to avoid or divest from certain sectors and companies (like fossil fuels) to shift allocations to investments with stronger environmental, social and governance (ESG) profiles. Still others may be motivated to look for impact investments where the purpose is to finance solutions to pressing environmental or social challenges, such as creating clean energy or affordable housing. Advisors able to stay abreast of the many new products, as well as changes to existing products, will be a better resource to climate-aware investors.
Climate change presents an opportunity for advisors.
While climate change represents a major challenge for us all to grapple with, it represents an opportunity for advisors that can talk the climate talk and walk the climate walk in terms of how they run their business and help clients navigate the changing investment landscape. Is your business doing things to reduce its environmental impact that clients will increasingly expect to see (less printing, more recycling, etc.)? Are you able to bring new investment ideas and opportunities to your clients that are aligned with their values, are of interest across generations, and speak to the legacy they want to have?
The bottom line for financial advisors is that climate change has already affected businesses and financial markets. Your investors will increasingly care, too, and regardless of their personal opinions, it is a significant trend that will demand their attention to some degree, and therefore yours. There's no day like today to start getting informed so you can better prepare your business and clients to stay ahead of the investment curve.
Justin Conway is vice president of investment partnerships at Calvert Impact Capital, a nonprofit investment firm. He is also President of Calvert Impact Capital's subsidiary Community Investment Partners, which provides customized portfolio services to institutional impact investors.
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