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Making SRI more Accessible to the Public: We Will Need to Go through Financial Advisors

Theodore Casparian

Many people in the Sustainable & Responsible Investment Field have worked very hard to persuade corporate boards and large investors to see sustainable investing as a viable, economic choice. But in doing so, on the whole, we have left out the public.  Take the limited breadth of sustainable 401(k) offerings as an example.   A study by Mercer noted that “assets…remain very low where…SRI options exist” and there is “not…enough demand from participants.”  I would suggest that this is because no one is sufficiently educating the public and no one is sufficiently educating those who serve the public – financial advisors and planners.  Indeed, my unscientific observation is that a higher percentage of small investors (under $100,000 in assets) believe that SRI is a purely political/sub-par return choice than do large investors (over $100MM in assets.) 

If we wish to see IRA, 401(k) and 529 plans with sustainable investment options, we are going to have to do a better job of educating the general public of the viability of these choices, and not just spend our time talking to those with $100MM to throw around.  The key reason to establish certification standards for sustainable investing professionals is to ensure the distribution of accurate information.  A second reason is to guarantee these professionals’ credibility.  The 300,000 or so professionals who advise the public about their investment options do not know what we know and believe that they do not need to know.  We need to change this perception.

Of the nearly $21 trillion of retirement assets under management in 2013, more than one-half - $11 trillion - were in defined contribution plans and IRAs ($5.37 T and $5.68 T, respectively.)  We are talking to the managers of the contents of the DC funds, but not the people who are choosing to offer those funds.  And we are not sufficiently talking to the people advising on the IRAs. 

Standards of sustainable investing and standards of what it means to be well versed in those standards will go a long way toward increasing the percentage of those $11 trillion that are managed sustainably.  The growth of the ”green economy” was driven by demand from this same public whom we are now neglecting and I believe that they will embrace sustainable investing even more rapidly than they embraced sustainable shopping.  We need to educate this public and the way to do so is by educating their advisors.

US SIF (formerly the US Sustainable Investment Forum) has created its Center for Sustainable Investment Education with the Fundamentals of Sustainable and Responsible Investing program and that is a great start.  The nascent Education Committee should get started on identifying what advisors (and in turn the public) need to know and how best to teach them.  I propose the Education Committee set a goal of 50,000 certified sustainable investment professionals by the year 2019.  That is equivalent to the current number of FAs at just the top four wire houses (and one in six of all financial professionals currently providing advice for a fee.)  If 50,000 people advising the public know what the members of the SRI community know—change will happen.  Yes, pension fund managers and high net-worth individuals have a role to play in building a sustainable economy, but so do the people who will be living in it.