Values Based Investing

A sustainable portfolio can provide more stable, long-term growth by holding companies to higher standards for corporate responsibility and conscientious business practices. Responsible investing can help you manage risk, mitigate volatility, and align your investments with your values.

Standard asset allocation and portfolio diversification testing is designed to mitigate risk factors from the broader market environment. In addition to analyzing your complete financial picture through these lenses, we focus on what’s most important to you and customize your investments to align with your values.

We offer two areas of values based investing for our clients: ESG Investing, and Faith Based Investing.

ESG Investing

Sustainable investing focuses on investing in companies with the best long-term prospects by identifying companies which meet high standards for corporate responsibility and conscientious business practices in areas of Environmental, Social, and Governance. By incorporating ESG factor analysis when choosing investments, investors actively encourage companies to improve their ESG scores. This may result in better corporate governance and greater regulatory compliance, creating self-perpetuating benefits and a sustainable portfolio which actively avoids companies based on values criteria not addressed in standard asset allocation and diversification analysis.

ESG defines a more rigorous way of evaluating companies’ standards for conducting business, including:

  • Environmental issues: how a company’s business practices affect natural resources, the climate, and other aspects of the environment
  • Social standards: a broad range of policies and the relationships that companies have with their employees, their customers, and the communities where they conduct business
  • Governance practices: how a company manages itself including executive compensation, internal business controls, and the rights granted to shareholders.

The idea of investing in companies that are mindful of the impact their business practices have on the broader society is not new. Increased awareness that ESG factors have a positive impact on performance is driving growth in ESG investment. Changing social norms, demographics, and political polarization in the country is leading investors to want to see their social views represented in their portfolios. Millennials consistently express greater desire for some sort of sustainable investing solution.

Researchers from the University of Oxford and Arabesque Partners aggregated the results of 200 studies globally and reports on the impact of sustainability on corporate performance and found the following:

  • 90% of the studies conducted showed that sound sustainability standards can lower a company’s cost of capital, allowing these companies to grow with lower costs and greater potential shareholder returns.
  • 88% of the research showed that solid ESG practices result in better operational performance.
  • 80% of the studies showed that good ESG practices positively influence a company’s stock price.

In 2019, the Morgan Stanley Institute for Sustainable Investing published Sustainable Reality: Analyzing Risk and Returns of Sustainable Funds comparing the return and risk performance of ESG-focused mutual and exchange-traded funds against traditional counterparts from 2004 to 2018 and found that sustainable funds demonstrate lower downside risk. During a period of extreme volatility, the study found “strong statistical evidence that sustainable funds are more stable.”


Faith Based Investing

Faith based Investing is a philosophy that appeals to many of our clients who would prefer they invest in companies that support their own religious values, while aiming to maximize investment returns. 

It this philosophy's early days, Methodist entities "screened" investments in companies that manufactured alcohol, tobacco, or promoted gambling. Today, investors can view their investments as an extension of their religious practice, and can be much more sophisticated in choosing the companies they invest in.

Faith-based investing can be just as successful as other investment philosophies, and similarly, is subject to similar risks, economic conditions, and market changes. The filters we include in our fund selection include, (but are not limited to):

  • Companies that promote life
  • Companies that are not affiliated with gambling
  • Companies that are not involved in adult themes
  • Companies that do not promote addictive substances
  • Companies that do not promote the rights of marginalized people

Please ask us for more information about how responsible investing can help you manage risk, mitigate volatility, and align your investments with your values. 

The returns on a portfolio consisting primarily of Environmental, Social and Governance ("ESG") aware investments may be lower or higher than a portfolio that is more diversified or where decisions are based solely on investment considerations. Because ESG criteria exclude some investments, investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria. Asset allocation and diversification do not guarantee profit or protect against a loss. Past performance is no guarantee of future results.