A client considering a passive ESG fund may associate “passive” with the low-cost, diversified market exposure familiar from broad-market index funds. But understanding how the fund tracks its index is different from understanding the sustainability judgments that index expresses.

Traditional performance attribution shows which active exposures added value to a portfolio and which detracted value. But for ESG mandates, it can lead to a misleading interpretation because it doesn’t explain why certain exposures exist.

Many ESG advisors can explain what’s driving their clients’ performance, but they stop short of detailing why. When an advisor fails to reveal the reasoning behind a strategy, that’s when a client loses trust — and how accounts are ultimately lost.