Road test ESG practices in your own RIA to better understand sustainable investments

Do you offer sustainable investment choices to your clients? If so, you might want to consider "walking the talk" within your own RIA. One way to become better-versed in ESG investments, after all, is to try them on for size in your own workplace. 

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At their heart, sustainability and social responsibility are all about accountability to your employees, the planet that hosts you and your firm's contributions to the economy. You may scrutinize larger companies on a set of sustainability criteria when considering investments — but if the tables were turned, how would you fare?

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To begin, create a materiality matrix geared to sustainability practices. A materiality matrix is not unique to sustainability strategies; it is a tool to help companies identify their priorities and set their overall strategy. You can use the materiality matrix to prioritize topics that your stakeholders are most concerned about and that will potentially pose the most financial risk to your business. 

Engaging your entire team, identify your firm's stakeholders. For financial advisors these typically include: clients, employees, industry community, local community suppliers and the environment. Next, list your relationships with those constituencies and describe how you interact with them: product due diligence and investment management for clients, for instance, hiring and training of employees or partnering with a local business group. 

Gain inspiration from widely used sustainability frameworks. According to the Sustainability Accounting Standards Board's framework, a financial advisory business falls under asset management and custody activities, with the four areas of particular relevance being: selling practices and product labeling; employee engagement, diversity and inclusion; product design and lifecycle management; and business ethics.

Sustain employees and clients
Incentivize employees through a sustainability lens, which emphasizes workplace well-being, improved morale and increased productivity. Employees in financial services are asking more of their employers and of the offices where they spend the majority of their waking hours. They don't just want a paycheck, they want purpose, a strong connection to their colleagues and a future. 

To create a healthier workplace, increase, if possible, natural sunlight and access to nature — bring plants inside. To increase job satisfaction, create flexible work policies by encouraging hybrid work schedules — which, as a bonus, will decrease your firm's carbon footprint. Consider offering an education stipend for learning and development. Offer paid time off to volunteer with local charities. Create a more humane workplace by offering paid sabbatical after a number of years of service. Offer Fridays off in the summer.  

Shrink the footprint
This planet is our only home, and while financial services businesses do not not have the same impact on the environment as compared to, say, construction companies, every business has some impact on the environment. 

READ MORE: Taking a 'stackable' approach to sustainability incentives

Form a "green team" among employees to create environmentally sustainable practices. Consider making consumer choices such as switching from plastics to ceramics in the office or creating a travel policy that encourages flying coach and taking public transportation. Organize recycling a program. If your local utility makes the option available, switch to renewable energy. Reduce heating and cooling in the rooms that aren't in constant use. Install automatic timers so lights are off at night and on weekends. Provide secure bike storage to encourage employees to bike to work.

Some of these suggestions may seem incremental or even ineffective in the larger scheme of things. But the alternative of doing nothing sends a signal to your employees and your clients that you don't care enough to try.

Publicize your commitment
In my experience, such initiatives often delight employees, clients and prospects alike. Share them to generate awareness. 

If you are a fee-based financial advisor who acts as a fiduciary, you already count yourself as a responsible business because the standards of care for your clients are higher than others in financial services. Most RIAs attempt to feature this advantage on their website, but too often it is expressed as a competitive advantage rather than the responsible and sustainable choice — in other words, the right thing to do.  

Communications to clients should display your credentials as a fiduciary and explain that your firm's transparent fees and fee structure are a win-win structure for both parties. Explain that you have chosen to be a fiduciary because you care about the financial future of your clients, and frame data security efforts as a way to embrace responsibility for clients' safety.

READ OR LISTEN: How to have more impactful ESG conversations with clients

Seek to be designated one of the "best places to work." Discover and apply for a local green business certification or research what it takes to become a B Corp. Join local responsible business organizations. Sign up for 1% for the Planet, or make your charitable donations public.

Do what you can
"Start where you are. Use what you have. Do what you can," as the famous Arthur Ashe quote goes. Now that you understand the areas to work on, categorize them into next steps: What can be done today … next month … in a year? 

Take some time to reflect on what you are doing to enhance the quality of relationships with your stakeholders. It's probable that you're already doing a lot but haven't thought about it from a sustainability lens. If you are a small team, engage your employees or an intern; if you are larger, reach out to a consultant. The key is to act. 

Considering ways to make your business sustainable may enable you and your team to better manage issues over the long-term, reduce operating costs, enhance your reputation and help you achieve enduring success.