Socially responsible investing picks up steam

Amaris Elliott-Engel, BridgeTower Media Newswires

As the United States grapples with its ongoing issues with racial justice in the wake of George Floyd’s death, some local investment advisors say they are seeing an increased interest in socially responsible investing (SRI).

Tamer N. Elshourbagy, vice president and senior portfolio manager for Tompkins Financial Advisors, says “you have the clearly horrible events that occurred with George Floyd and the ensuing protests and riots. That has resulted in even further interest in investing in the (socially responsible investing) space itself. We are seeing more questions being asked in terms of what is being offered and, ‘How can I get invested?’”

Charles Sawyer, a financial advisor with Council Rock Wealth Advisory Group, a financial advisory practice of Ameriprise Financial Services, Inc., says in 2020 the financial markets have seen “record inflows into sustainable investment even during the recession. The trend we have been seeing over the past decades of inflows into sustainable investment hasn’t slowed down at all in 2020. In fact, it’s even going up. More and more, the American public is interested in transparency and accountability from our institutions and our employers, and they’re seeking to invest in companies with an inclusive and diverse workforce. These principles are really at the heart of sustainable responsible investing.”

Zachary Armstrong, a financial advisor with Sage Rutty and Company, Inc. specializing in SRI, says clients are interested in putting their money to work in supporting and addressing racial equity and diversity.

“I am seeing it very substantially spill over into the social responsibility investing space,” Armstrong says. “The reason why, as a society, is we realize how much power different companies and employers have. Some of discrimination does, unfortunately, exist in some workplaces. The prevailing thought process is if companies approach issues of racial equity in the right way they can be a big part of the solution to fill the ever apparent need to combat racism, to combat all of the social justice issues.”

Armstrong notes that some of the ways companies can be held to account for racial equity include the diversity of their workforces, the diversity of their boards, and the equity in pay rates among employees along their racial identities.

“When you’re a trillion dollar company, there are a lot of things you can do with your financial power and your employer power to potentially help” with racism and racial equity, Armstrong says.

Chuck Wade, a senior vice president and financial advisor at Brighton Securities, says that socially responsible investment can cover what companies are doing in terms of environmental impact, what they are doing in terms of social issues like treatment of their employees and diversity in their workforce, their leadership and their board of directors and what companies are doing in terms of transparency and accuracy in their corporate governance. These environmental, social and governance (ESG) criteria have become so popular in investing that “ESG has become its own investment sector” like large cap stocks, mid cap stocks and international stocks, Wade says.

Armstrong notes that in January BlackRock chief executive officer Larry Fink announced in a letter to CEOs “a number of initiatives to place sustainability at the center of our investment approach, including: making sustainability integral to portfolio construction and risk management; exiting investments that present a high sustainability-related risk, such as thermal coal producers; launching new investment products that screen fossil fuels; and strengthening our commitment to sustainability and transparency in our investment stewardship activities.”

Fink also wrote “a company cannot achieve long-term profits without embracing purpose and considering the needs of a broad range of stakeholders. A pharmaceutical company that hikes prices ruthlessly, a mining company that shortchanges safety, a bank that fails to respect its clients — these companies may maximize returns in the short term. But, as we have seen again and again, these actions that damage society will catch up with a company and destroy shareholder value.”

Armstrong says the largest investment manager in the world saying it will disinvest from companies unless they follow SRI values is significant. Fink was saying, Armstrong, says, ‘“Look, corporation, you have a responsibility to society and if we don’t see what we like from you in terms of your social responsibility and trying to help in the betterment of society and various social justice issues, you risk losing us as an investor.”

Armstrong also notes the costs have come down on SRI in terms of the fees being charged by fund managers.

Now that SRI has become more popular, local advisors specializing in this type of investment advise clients to make sure that investment dollars are going to individual stocks, mutual funds or exchange-traded funds (ETFs) that are not just SRI in name only.

Elshourbagy and Sawyer both say that there is a concern that companies are “whitewashing or greenwashing” by making statements that make an investment appear more serious about ESG than they actually are.

Elshourbagy notes recent corporate lapses like Equifax’s privacy breach, Volkswagen hiding the true rate of emissions from its diesel engines, and BP’s oil spill in the Gulf of Mexico.

There are different agencies that score companies on ESG including from a “racial equality perspective in terms of having a diverse labor force and diverse board of directors and management team,” Elshourbagy says.

Local investment advisors say it is important to work with a financial advisor who is familiar with SRI values in order to vet investments and ensure one’s money is actually being used to further social values at the same time as meeting one’s investment goals.

It is important to vet the claims that mutual funds or ETFs are making about how compliant their constituent investments are in terms of ESGs by examining the individual companies for complying with those values, Sawyer says.

Local investment advisors also say it is important for their clients to be transparent about what social values are important to them for their investments.

“Our job is to ask good questions and listen to the answers and try to find solutions,” Wade says. “Our client’s job is to be honest and upfront about what is most important to them.”

Applying an SRI lens to your investments does not mean a diminishment on returns, Armstrong, Elshourbagy, Sawyer and Wade say.

“Studies have found that companies that have high standards do outperform the broader market,” Elshourbagy adds.


Amaris Elliott-Engel is a Rochester-area freelance writer.