Sep 27, 2024 - VALUES-BASED INVESTING
What is values-based investing?
Values-based investing originated in the 17th and 18th centuries when institutions like the Quakers, Methodists, and other religoios groups avoided investing in slavery and alcohol. This style of investing has since evolved, and today, it has become widely known as a type of investment approach that integrates an investor’s personal values, moral principles, and social beliefs alongside their financial decisions.
The range of values can include:
- Ethical considerations – avoiding investment in companies that do not align with an investor’s moral values, such as alcohol, tobacco, and firearms.
- Social responsibility – investing in companies that focus on creating positive social impacts such as community development, diversity and inclusion initiatives, and healthy labor practices.
- Environmental awareness – investing in companies that aim to reduce the carbon footprint created by traditional fossil fuels. These companies focus on areas such as renewable energy, CO2 capture, and eco-friendly practices.
Ways to Invest
There are many approaches to begin your values-based investing journey. Some commonly used strategies include:
- Negative Screening – excluding certain companies or industries from your portfolio based on ethical, social, or environmental values.
- Positive Inclusion – actively selecting companies or industries that show strong performance or leadership in environmental, social, or governance factors.
- Thematic Investing – Some examples include Artificial Intelligence (AI), space, infrastructure, and renewable energy.
- Direct/Investing – investing directly with an individual company’s projects that are designed to achieve specific social or environmental outcomes. Some examples include building homes or water wells in underdeveloped communities.
Values-based investing strategies are created using different types of securities – stocks, bonds, and alternative investments – and can be managed both actively and passively according to your financial objectives. The availability of securities tailored to investors’ values has also evolved over the past decade to include thematic exchange-traded funds (ETFs) and mutual funds focusing on socially responsible companies and themes, green and blue bonds focusing on environmentalism, and private equity for impact investing.
If you are interested in this style of investing, we recommend speaking with one of our Wealth Advisors to discuss the best way to implement values-based investing into your portfolio strategy.
Disclosure
Values-based investing does not guarantee a profit and market fluctuations may result in the loss of some or all of your principal. Portfolios with socially responsive investing screens and/or sustainability impact considerations may limit the number of investment opportunities available, and as a result, at times, a portfolio may produce different returns or more modest gains than portfolios that are not subject to such special investment conditions. For example, a portfolio may decline to purchase, or underweight its investment in, certain securities due to sustainability impact considerations when other investment considerations would suggest that a more significant investment in such securities would be advantageous, or the portfolio may sell certain securities for social reasons when it is otherwise disadvantageous to do so. Sustainability impact considerations may cause a portfolio’s industry allocation to deviate from that of accounts without these considerations and from conventional benchmarks.
The content is for information purposes only and developed from sources believed to be providing accurate information. We make no representations as to its accuracy or completeness. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
Opinions expressed herein are solely those of the individual and may not be representative of SAX Wealth Advisors. Advisory services are offered by SAX Wealth Advisors, an SEC[1] Registered Investment Advisor.
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