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ESG Wealth Management: What Does The Future Hold?

Posted by Lyn Dippel, JD, CFP® on February 23, 2021
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ESG Wealth Management: What Does The Future Hold?

The factors that drive investment decisions can be deeply personal. For example, you may choose to only invest your wealth in companies with strong environmental, social, and governance (ESG) commitments and practices that align with moral stances you hold or causes you support. In this case, it would benefit you to explore ESG wealth management.

In this blog post, we’ll explain ESG wealth management, discuss how it’s evolved over the past few years, and discover what the future of ESG investments likely holds.

Are you ready to create a financial and investment plan that aligns with your values? Schedule a call with Bay Point Wealth to get started.

ESG Wealth Management, Explained

ESG wealth management is a type of socially responsible investing that first became popular about a decade ago. ESG investment funds include stocks of companies that meet certain environmental, social, and governance criteria—making them an attractive option for socially conscious investors.

These funds can contain stocks of companies within any industry, and the criteria for what constitutes such socially responsible investing currently varies between each fund.

The important point to remember about ESG wealth management is that, like any investment strategy, it should be congruent with your broader financial plan. Wealth management should always consider your needs in the areas of tax planning, insurance, retirement savings, and estate planning, in addition to investments. Your wealth management plan should also align not only with your financial goals, but with your personal values.

The Evolution Of ESG Wealth Management

ESG investing has become increasingly popular over the past three years as the number of ESG funds on the market has doubled. One factor driving this shift is that women have more wealth than ever before—and they are more inclined than men to be interested in ESG investing.

In addition, 2020 saw a heightened focus on issues of social justice, highlighted both in traditional and digital media around the globe. Greater awareness of these topics has led more investors to explore ESG wealth management.

Finally, ESG investing is also gaining more attention because it’s becoming more accessible. Today, there is a larger number of ESG funds available to investors than in previous years, and it’s now widely accepted that ESG investors don’t have to sacrifice solid returns to stake a values-based claim in the market. Large financial firms have picked up on the demand for ESG funds and have begun training analysts and creating products in response to this shift in consumer preferences.

What does the future hold?

ESG investing trends will likely continue to impact the wealth management industry over the next several years. The pressure is increasing for mutual fund companies to sell ESG offerings—and this demand will continue to accelerate. Fortunately for investors, access to information about ESG criteria is more clear and reliable than ever before, and it’s no longer as difficult to obtain data on company practices because regulatory changes and consumer demand have required companies to make this information more accessible.

Greater availability of and transparency around ESG funds will also improve returns for investors. After all, when a company makes a commitment to environmental sustainability or social responsibility, that’s a long term strategy with the potential to pay dividends.

Interested in learning more about ESG wealth management?

Investing based on your personal values is a powerful way to drive change while growing your wealth and working toward your financial objectives. If you have questions about how to get started with ESG wealth management, our team of experts at Bay Point Wealth is here to help.

Schedule a call with us today to book a complimentary consultation where we’ll explore your financial and investment goals and walk you through the process of how we can create a plan that’s right for you.

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Topics: Investment News