George Gay’s Advice for Making Advisors Your Sustainable Investing Allies
Financial advisors are an important resource for values-based investors. And yet, oftentimes, advisors shy away from discussions about sustainability. Confusion about terminology and disagreements about strategy can derail the conversation even before it starts — research from Cerulli shows that advisors remain wary of leading the way on sustainability conversations.
George Gay wants to change this dynamic. Gay is the CEO of First Affirmative, a registered investment advisor (RIA) that specializes in environment, social, and governance (ESG) investing. Through First Affirmative, and the annual ESG for Impact! Conference he runs for his network of advisors, Gay is a leading advocate for incorporating sustainable investing into the advisor/client relationship.
In a recent interview with Till Investors, Gay discussed his views about money and investing and offered advice about engaging your advisor on the role of values in your investment strategy.
Taking a New Approach to Money and Investing
George’s history with sustainable investing goes back a long way. He’s been the CEO at First Affirmative since 1999 and has run some form of annual socially-responsible investing conference for more than 30 years. Now called ESG for Impact!, it is one of the largest gatherings for sustainability-minded advisors today.
Gay’s view is that your personal values matter in your money decisions — something we at Till Investors could not agree with more. Regardless of what the specifics of your values are, what matters most to Gay is that you work with your advisor to integrate them into your personal financial planning.
So why doesn’t that happen more often with the typical advisor? Part of the reason is that adding values to the financial plan can be an unfamiliar process to a classically trained planner. Even talking about values can feel like dangerous ground — as Gay points out, “advisors don’t always feel they have bandwidth for uncomfortable conversations.” And values conversations can become uncomfortable when views differ.
Still, he feels that surfacing and addressing those issues is essential to developing a plan that truly reflects your wishes and ensures that your financial success is built on a sustainable platform.
Talk about Your Values — and Theirs
Gay is motivated by strong beliefs about money, investing, and the way business is conducted. He’ll tell you his point of view if asked, and he thinks any advisor should be prepared to do the same.
You don’t have to share the exact same values as your advisors — their job is to listen to you. You’ll want them to show respect for your values, even if they are different from the advisor’s view. And you’ll want to see that they are conscious and intentional about incorporating your values into your plan.
This is critical because, in Gay’s view, values plays a role in the advice you receive, regardless of how willing your advisor is to discuss it. “Advisors frequently make decisions for their clients based on their personal viewpoint, their politics, and their values. It’s not uncommon, for example, to see advisors changing client portfolios because they like, or don’t like, a particular piece of legislation coming out of congress.” You can expect this to happen if you don’t ensure your values are part of the thought process.
Dive into the Details
One of the frustrating aspects of sustainable investing is that the language around it varies — a lot. For example: the term “ESG investing” has faced a political backlash lately, from people who want to call it “woke” capitalism. But when the term was originally coined in the early 2000s, it was appealing precisely because it was a neutral term that didn’t imply specific values.
One consequence is that you and your advisors might be using the same terms but talking about different things. For better or worse, it falls to you to ask detailed questions and make sure you understand the answers. For example: There are three main types of sustainable, or ESG, approaches that mutual and exchange-traded funds use — avoiding, rewarding, and engaging. You can learn more about what approach you prefer by taking our “fighting style” quiz. When your advisor recommends a fund, let him know your fighting style and ask if it’s a fit with his recommendation.
It’s OK to Start Small
It’s reasonable to have big goals when you invest with your values in mind, and Gay advocates for making a commitment to values alignment across your portfolio. But it’s also true that even a modest investment in a legitimate ESG fund moves the dial — especially since you are joining many other investors in demanding sustainability from your investment program.
Starting small — say by moving a percentage of your retirement savings into a sustainable fund — is one way to learn about how values-aligned investing works and the unique opportunities it offers. For example, Gay’s network of advisors and many of the investment strategies they recommend are advocates for sustainable business practices, and vote company proxies to reflect those concerns. Proxy votes are a direct way that your voice can be heard within corporate boardrooms, but traditional funds tend not to make information about these votes readily available. This is one of the benefits of being part of the larger group of investors who desire sustainability.
Gaining experience can also help you recognize and manage risk in your sustainable portfolio. As Gay notes, some sustainable funds forego big global companies in favor of emerging, innovative firms that may be prone to wider price swings. They offer a great impact opportunity, but an entire portfolio of small, emerging companies will have a much higher risk profile than a typical blue chip strategy.
As your portfolio grows, you’ll also be learning more about sustainability together with your advisor, and the two of you can work together to expand your impact over time.
Time to Move On?
While it isn’t necessary to change advisors to pursue sustainable investing, you may find that working with a values-oriented advisor with ESG expertise can provide you with a wider range of investing opportunities that are a closer fit to your specific goals and values. A values-focused firm like First Affirmative also offers tools that give you greater insight into the impact of the companies you invest in.
From Gay’s perspective, the most important thing is to keep the conversation going. “Don’t let an advisor shut you down if you want to talk about values,” he says. “You can build a very successful financial future by focusing on sustainable companies and personal values, and that’s a double win for every investor.”
