Clarity AI’s U.S. Strategy Manager Says ESG and Sustainability Investing Can Be Customized to Match Each Client’s Religious and Ethical Views
The Subway sandwich franchise chain built its reputation by providing a sandwich made to exact order among dozens of options. Veggie patty with raw jalapeños and two stripes of mustard? Yes. Turkey on Italian bread with tomatoes and Southwest spicy sauce, hold the lettuce? Of course!
Fast food customers like their sandwiches tailored to their unique desires. Often, financial advisory clients feel the same way – they want customization across various aspects of their financial life, including ESG and sustainable investing.
And when it comes to ESG and sustainability, many financial advisors are seeking investment solutions that can be tailored to each client’s ethical and religious concerns.
A number of companies have stepped up to fulfill this rising need, driven by wealthtech that can automate and integrate ESG and sustainability investing solutions with an advisor’s broader tech stack.
Moment of Clarity
Clarity AI is one such firm, providing a platform to investors and organizations that leverages machine learning and big data to produce environmental and social insights. As of March, the firm’s platform analyzes over 30,000 companies, 220,000 funds, 198 countries and 187 local governments for the purposes of reporting, corporate research and investing.
With offices in the U.S., Europe and the Middle East, the senior executive leading the charge for strategy in America is Goldman Sachs and Edward Jones alumnus Lydia Pinnell Lawrie, the firm’s Senior Strategy Manager for Wealth Management.
We caught up with Lawrie to ask her about customizable ESG and sustainability solutions and how advisors can incorporate those solutions into their client services.
WSR: What ESG and sustainability solutions are available for investors who wish to direct their investments according to ethical and religious concerns? And would these solutions come in a pre-set package for individuals with similar concerns, for instance “Islamic” or “Catholic” solutions?
Lawrie: As an industry, we have seen strong flows into “sustainable or ESG packaged products,” which is a clear signal that clients care. However, a challenge with using a product-only approach is it becomes harder to customize and solve for your client’s unique points of view that are often driven from ethical or religious beliefs.
In addition, not all ESG frameworks set out to accomplish the same goals, which often creates confusion for clients. Lastly, a simple exclusion strategy by industry can have unintended implications. At Clarity AI, we solve these industry problems in two ways.
First, we focus on transparent metrics that help advisors and clients understand what drives our methodology. Because of this, a firm or advisor can customize their approach to their current investment strategy and overlay preferences based on solutions ranging across risk, impact, climate, regulatory issues and values.
Next, Our Values solution enables an advisor and client to customize the selection and level of importance from a curated list, resulting in alignment transparency across their investable assets (including mutual funds and ETFs).
We believe it’s important for an advisor to start the conversation with “what’s important to you” and then work together to incorporate that into other critical trade-off decisions.
WSR: Can ESG and sustainability solutions be tailored to a mix of ethical or religious concerns specifically customized to an individual investor? If so, at what level would the typical investor be able to receive this type of service? Ultra-high net worth? High net worth? Mass affluent?
Lawrie: We absolutely believe that sustainability frameworks can be leveraged to improve a personalized client experience – including religious or ethical goals – when approached with transparency and expectations are clearly outlined. In addition, we can integrate into an organization’s technology across the user workflow, enhancing the overall experience.
Due to rapidly improving technology that enables personalization at scale, paired with drastically improved available data, we see sustainability solutions being integrated across segment types and sizes – as they should be. Many products and solutions that were historically available to the ultra-wealthy are commonplace across segments today.
Take direct investing as an example – with lower account minimums, customizable preferences and automatic trading, more people can take advantage of this beneficial strategy. The same holds true for sustainability incorporated into a client’s planning and investment process whether it’s a model portfolio, SMA or portfolio of mutual funds, stocks and bonds.
WSR: How would a financial advisor based in the U.S. or Canada go about adopting these solutions for their clients?
Lawrie: Depending on the type, size and needs of your business or organization, Clarity AI has solutions ranging from a web app to widgets to API integrations. Take our values alignment solution for example – we can integrate into your CRM to capture client preferences alongside suitability preferences. We can integrate into planning software to set sustainability goals and view alignment across aggregated relationships.
As the data and solutions are connected downstream, advisors can now overlay sustainability preferences to their current investment process – and then integrate directly into their current client reporting.
In addition, our solutions are being integrated into home office functions including manager due diligence, platform curation, portfolio construction, model management, product creation and regulatory functions to curate the offering available to advisors and clients. It is important to us that we not only solve an advisor’s desktop capabilities, but also consider important functions at the enterprise level.
Janeesa Hollingshead, Executive Editor at Wealth Solutions Report, can be reached at firstname.lastname@example.org