With demand growing for investments that positively affect the environment and society, Merrill Lynch and its Merrill Edge unit announced the launch of five new portfolios that incorporate environmental, social and governance (ESG) factors in the mix.
In a press release earlier this month, Merrill said that the new investment portfolios were designed by the Global Wealth and Investment Management (GWIM) chief investment officer and incorporate the CIO's investment process, portfolio construction views, portfolio management and oversight routines. The products comprise mainly exchange-traded funds, require a minimum investment of $5,000 and are constructed to provide a range of investment choices, from conservative to aggressive.
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“The demand for ESG-integrated investment options has increased as more investors are seeking a 'double bottom-line' approach to investing and a way to add an environmental or societal impact objective to a financial return," said Chris Hyzy, chief investment officer for GWIM in the press release. According to Merrill Lynch, impact investing, in which clients can align their investments with their values and get a good return, has been on the increase during the past two years.
Citing the Forum for Sustainable and Responsible Investment, Merrill said that $8.72 trillion was invested in impact investments at the beginning of 2016, up 33% since 2014. Merrill noted that interest is particularly strong among younger and female investors. Millennials, who make up the largest group of impact investors, could drive $15 trillion to $20 trillion of inflows into ESG investments over the course of next 20 to 30 years, which would nearly double the size of the U.S. equity market, Merrill said in the press release.
"These new portfolios are part of the ongoing expansion of our investment offerings and build upon a broad platform of both solutions and thought leadership in the impact arena," added Keith Banks, vice chairman of GWIM and head of the CIO and the Investment Solutions Group for Merrill Lynch and U.S. Trust, in the same press release.
In February, Merrill Edge – the financial platform that offers access to online and advised investing, trading, brokerage and banking services – updated the dashboard for its online trading service to include ESG scores from MSCI. The MSCI ESG score enables investors to identify companies based on their contributions to the environment, society at large and governance. Companies that land a score of "AAA" from MSCI are doing a good job, while those with a score of "CCC" are performing poorly from an ESG perspective. With the scoring, Merrill Edge investors will be able to pinpoint investments in which the companies are leaders in ESG and avoid those that are ranking poorly.