How to Find a Socially Responsible Financial Adviser

Investing

This article originally appeared in The Wall Street Journal, on

ESG investing can be confusing. It helps to have an adviser who is on the same wavelength.

By Cheryl Wi nokur Munk

Sept. 30, 2021 1:00 pm ET
It isn’t easy being an ESG investor these days. Financial products that focus on environmental, social and governance issues have multiplied, leaving many investors confused about which ones best suit their needs.

To help, some investors might be considering financial advisers who focus on ESG and are able to offer investment ideas that closely track their clients’ moral and financial goals.

For investors who want to go that route, here’s how to get started, as well as some questions to ask prospective advisers.

What tools can help me find a financial adviser who is focused on ESG?

There are several free, searchable online databases that list financial advisers who self-identify as having an ESG focus. Just keep in mind that being listed in a directory isn’t an endorsement of an adviser’s abilities or investment prowess. Due diligence on your part is still recommended.

  • Certified Financial Planner Board of Standards Inc.’s database lets investors filter for “socially responsible investing” to find certified planners nationwide who offer these services.
  • In the College for Financial Planning’s database, investors can search under the designation “Chartered SRI Counselor or CSRIC” for advisers.
  • Green America, a nonprofit alliance that focuses on issues including climate and clean energy, sustainable food and responsible investing, has a listing of financial-planning and investment consulting firms. Advisers listed here are certified members of Green America’s Green Business Network or are members of US SIF, a sustainable-investing trade group. According to a Green America spokesman, listed advisers self-report whether they have experience creating portfolios that are fossil-fuel free and whether they have worked with clients to pursue fossil-fuel-free investments.
  • In the US SIF’s directory of members, investors can do a basic search under the category of “financial planners, advisors, and brokers” or an advanced search to narrow the list by city, state or ZIP Code.
  • XY Planning Network, a member-based organization of fee-only advisers, has a find-an-adviser portal. Entering SRI/ESG as a keyword search will turn up a list of several dozen advisers who identify as having this specialty. To be a member of XY Planning Network, advisers must work with Gen X/Gen Y clients in some capacity, operate on a fee-only basis and be in good standing with Finra, among other criteria.

How do I evaluate the adviser’s ESG prowess?

First, see if an adviser has a disciplinary history, using Finra’s BrokerCheck, the Securities and Exchange Commission’s investment adviser public disclosure website and the CFP Board’s site. Enter the adviser’s first and last name to check for customer complaints, regulatory actions or other disciplinary measures.

After finding an adviser with a clean disciplinary history, you might ask the adviser directly about his or her experience with sustainable or impact investing and how long it has been part of their practice, says Josh Charlson, a director of manager selection for Morningstar Research Services LLC, a subsidiary of Morningstar Inc.

Ask how many clients the adviser has created ESG-focused portfolios for. “Ideally you’d be working with an adviser who has some history in this area instead of someone who just stepped into it,” Mr. Charlson says.

How do I assess whether an adviser is aligned with my goals?

Start by asking the adviser for his or her approach to ESG, socially responsible and impact investing. If you are looking for a specific focus—such as environmental investing or a particular impact goal, for example—can the adviser accommodate this, or does the adviser only offer a select few investment models that aren’t readily customizable?

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“If you are someone who is more focused on, say, impact investing, or you don’t want tobacco or nuclear-energy stocks, is the adviser capable of customizing the plan or the portfolio to accommodate your preferences?” Mr. Charlson says.

Or, if you’re someone interested having a more diversified portfolio centered on sustainability and impact investing, how would the adviser accomplish this?

Whether the adviser is recommending you invest in funds or individual stocks, it is also important to see how his or her investment returns compare to appropriate benchmarks.

What are some other ways to gauge an adviser’s ESG expertise?

While it’s no guarantee, financial advisers with a genuine interest and expertise in ESG and impact investing usually will highlight it on their websites and LinkedIn profiles, says Michael Young, manager of education programs at US SIF.

“If they are putting themselves out in the public sphere that they are doing this, that’s a good starting point,” he says. 

Mr. Young recommends asking them about their professional networks, affiliations and designations related to sustainable investments. For example, is the adviser a member of Ceres, a nonprofit focused on sustainability, Green America or US SIF? Does the adviser speak at sustainable investing or other investor conferences about the topic?

The College for Financial Planning in 2018 began offering certification in socially responsible Investing, its SRI Counselor Designation program. It’s a relatively new designation, but Mr. Young says it can be another signal of interest in and ongoing commitment to the field.

Ms. Winokur Munk is a writer in West Orange, N.J. She can be reached at reports@wsj.com.