For wealthier clients, Mr. Vanneman advises a strategy of direct indexing, in which they create a portfolio that mirrors an E.T.F. but with fewer stocks. Owning the individual stocks allows investors to benefit from tax losses that can pad their returns by as much as two percentage points.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a phone interview from Davos that his firm had created a special sustainable portfolio for people in its private client group. The strategy had $1 billion in 2018 and has grown to $9 billion today, with some clients putting the bulk of their wealth into it.
“We made a distinction between sustainable investment and impact investment,” Mr. Haefele said. “Impact is a more narrow category — you have a demonstrable social good that is reported out to investors. Sustainable is broader and encompasses more strategies.”
Still, within even UBS, the amount committed to this is small: The firm manages about $2.6 trillion.
The Improvers. A perfect world, of course, isn’t easy to achieve. Plenty of companies will never be totally green, but many are moving toward operating in a more sustainable way.
“The key question is, ‘How does this impact my money?’” said Steve Norcini, senior equity portfolio manager Wilmington Trust and the author of a recent paper on sustainable investing. “We view climate change as one of the many risks that need to be evaluated with a company. We look at carbon emissions per dollar of sale, water usage policy, how much energy usage comes from renewables. It’s all trying to get at how sustainable is this business.”
Doing this, though, means some of the investments may not appear to tick a climate-friendly box.
Mr. Norcini pointed to CMS Energy, which has pledged to shut down all of its coal plants and replace them with up to 50 percent renewable energy by 2040. But right now, it still has coal plants. Another is Total S.A., which he considers among the most progressive oil companies, even if it’s still in the business of pulling oil and gas out of the ground.