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Down markets provide new opportunities for ESG investments

Down markets provide new opportunities for ESG investments

Market volatility has been the main focus of late, learn how you can offer ways for clients to stay invested in times of uncertainty.

Jack Casady

Practice Management
October 18, 2022

Market volatility has been the new focus as we near the end of 2022. The recent sell-off in the U.S. stock market grew in September that wiped out the S&P 500’s 2021 gains and is now down nearly 24% on the year. The Forbes market forecast for October noted that this was the lowest level since November 2020. Pair with a bear market and growing volatility, inflation has also been a focus due to the continued rate rises by the Federal Reserve. With another Fed meeting in November, many are left wondering if the Fed’s recent strategy of rising rates will push the economy into rescission territory. 

Don't miss the markets best days

In times of market volatility, it can be a challenge to keep clients invested in their portfolios when the market feels like it’s in freefall. As a financial advisor, keeping clients calm and invested in their portfolios means they will not miss out on the market's best days. In a historical review of $10,000 invested in the S&P 500 index between 2006 to 2021 a portfolio that stayed invested during times of market volatility had an annual total return of 10.66% which would have grossed around $45,682 of the total investment amount. However, If a client were to sell off their investment in the index and missed the 10 best days over that timeframe, their investment would have missed out on almost $25,000 in growth. 

Keeping a long-term investment mindset does pay off, but it can be challenging for clients to stay the course through times of high volatility. However, there can be other ways to keep them invested and ready to earn on the market's best days.

Aligning clients’ investments with their values offers the ability to personalize portfolios to better reflect what they care about and also feel they have a deeper interest in the investments selected with their advisor. Advisors who take an active role to help their clients determine their values and add purpose to their portfolio offer more than just a one-size-fits-all approach to their practice and bring added value to their clients.

With that, adding in the ability to showcase investment impact across metrics that matter to them also provides another focus to talk about besides portfolio losses in a quarterly review and also can bring some positivity when outlooks continue to sound bleak. 

Finding value in values

In our experience, advisors that utilize the metaphor report help to provide a long-term investment perspective in all markets due to the impact a client is responsible for if they continue to stay invested. 

In using the metaphor report from YourStake, an Advisor would be able to load in their clients' portfolio and show them that, if they were to invest $1 million over 10 years in a particular portfolio compared to a benchmark, they can see that they might be responsible for 569 fewer chickens killed, 156 fewer hours of incarceration, 58 more homes powered by clean energy, and 42 more meetings led by women based on their ownership percentage in companies whose activities lead to these outcomes. 

Capture of a few metrics used in the metaphor report.

Showcasing these positive impacts can help provide a full picture of their portfolio outside of gains and losses and provides the ability to translate complex ESG topics into easy-to-understand terms. 

Advisors also have the ability to click into each metric reported on to see full transparency to how the impact was calculated, which stocks or companies are adding or affecting the metric, and where each number is being sourced from. Feel confident in ESG investing that takes away the need for complex scores, we give you the numbers, the data, and the sources. 

See how our team can help keep clients invested in times of market volatility by taking you through a personalized, live demo to find new ways to align investments with client values.

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