Morningstar - Q1 2020 - 31

ESG PERSPECTIVE

Responding to Risks, a Firm Transitions to ESG
Advisor Sam Ogrizovich has been running his own
firm since the late 1970s but only recently
started incorporating ESG into his practice after
observing that sustainability issues were
becoming challenges for companies. Cristine
Marik helped with the transition.
Morningstar: Why did you decide to integrate ESG into
your practice?
Sam Ogrizovich, CFP, is the
founder and president of
OFM Wealth in Orland Park, Ill.

Ogrizovich: In 2016, I realized that issues such
as climate change risk, consumer privacy,
and questionable corporate governance were
increasingly problematic, and our firm
could potentially respond to these challenges.
I thought we could respond by sharing
our concerns and hopes with engaged clients
and, subsequently, directing significant
dollars to purposeful investing.
What was the biggest challenge you faced
incorporating ESG into your practice?

development. The acronym ESG, terms like impact
investing and sustainability were not part of
traditional financial dialogue. Much thought was
given to introducing sustainable investing
during client meetings as well as modifications
to our website and newsletters.
It has been an exciting three years-plus process.
Our research grows deeper and our messaging
is now crisp and clear.
What was the reaction from established clients
as you introduced them to ESG? How did you address
their concerns?
Cristine Marik, CFA, CFP,
is a senior wealth manager at
OFM Wealth.

fees, etc. A few clients raised concerns
that ESG was a government-directed initiative.
We reassured them that sustainable
investing is being driven by shareholders and
capitalistic motivations.
Do advisors have a responsibility, fiduciary or otherwise,
to consider ESG risks when investing for clients?

Marik: As fiduciary advisors, I believe we do.
If ESG considerations are material to a business
and if a lack of proper management of these
risks can negatively impact corporate profits and
our returns as investors, why wouldn't you
look at all relevant available information? From
our perspective, we view ESG integration
not only as a risk-management tool but also as
a means to identify investment opportunities.
How will ESG help your clients in the long run?

Marik: Our process for introducing sustainable
investing to our existing client base has
been ongoing for the last two years. We have
had multiple conversations in some cases.
Over 70% have expressed an interest in integrating
ESG screening into their portfolio.

Ogrizovich: There were a few significant
challenges. First, our advisory team had
to understand the various ESG issues. Then, the
team explored the depth and breadth of
potential investment solutions. No small task.
Research, material ESG screening, and
product development have grown far beyond the
information and products that were available
three to four years ago.

Some clients were unfamiliar with ESG and
sustainable investing and were unsure
how to respond. We found it helpful to share
stories of how fund managers are engaging
with corporations on ESG issues and
to show Morningstar reports of fund holdings.
This was instrumental in demonstrating
that sustainable investing is not a "fringe"
investment strategy.

As our research progressed, we challenged
ourselves to confirm that the pursuit of sustainable
investing was not only valid but also in our
clients' best interests. Our increased awareness
of ESG issues and the connection between those
issues and potentially profitable ESG products
led us to conclude that our sustainable investing
initiative was clearly in our clients' interests.
Our next challenge was appropriate message

By far, the most frequent concern raised was
a presumption that ESG integration would
hurt investment performance. We have successfully
overcome the performance myth by giving
clients real-life examples of how ESG-screened
funds have not sacrificed on performance. All
funds on our recommended list still need
to meet our standard selection criteria, including
consistent risk-adjusted returns, reasonable

Ogrizovich: I believe our clients will benefit
in a few ways. I'm hopeful that certain investment
risks will be avoided while opportunities will
emerge. Also, it's powerful to witness how
sustainable investing connects clients' money to
issues that they care about in a dynamic,
capitalistic marketplace.
Marik: We believe that by helping to solidify a
connection between the clients' "purpose"-
the issues important to them-and their
investments, ESG will help them stick with their
plan for the long haul. Going forward, developing
sustainable retirement income withdrawal
strategies will be directly connected to identifying
sources of sustainable investment returns
and companies that are addressing critical ESG
risks, including the economic impact of
climate change.

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