It is often difficult to effectively respond in times of social unrest or injustice like we are currently seeing across our country. At the very least, these moments should lead to introspection and self-evaluation. As we look at what we have been entrusted with, it is natural to evaluate how our financial investments can be used to make the world a better place. One platform that allows financial investments to serve as an advocate for social and ethical change is Value Based Investing.
Stewardship Advisors has specialized in Value Based Investing, which may commonly be referred to as ESG (Environmental, Social and Governance) Investing, SRI (Socially Responsible Investing) or even BRI (Biblically Responsible Investing) for many years. Each has its specific area of emphasis, but at its core, Values Based Investing seeks to align an investor’s money with their values in order to positively impact society.
Environmental, Social and Governance
ESG is the broadest defined Value Based Investing platform and looks at parameters such as diversity, human rights, company ethics, executive compensation, transparency, climate change policies, and pollution to name a few. The ESG philosophy is fairly straight forward: companies with positive, ethical standards and good business practices will reward investors with strong financial and social returns.
Socially Responsible Investing
SRI looks at many of the same parameters as ESG but goes a step further by specifically eliminating investments based on certain ethical components. Examples of investments often eliminated using SRI screenings are companies profiting from guns, tobacco, gambling, and alcohol.
Biblically Responsible Investing
BRI is like SRI in that it specifically eliminates certain investments but its criteria is based on faith-based values regarding moral and social principals. BRI commonly screens out companies that profit from pornography, abortion, and addictive behaviors.
Values Based Investing options have grown tremendously over the past 10 years, making it an increasingly popular investment strategy. It is logical to ensure that you do not invest in companies that differ from your values, but it is also important to acknowledge possible drawbacks with this strategy. Investment exclusivity comes at the price of diversification, and when segments of the market are specifically excluded from a portfolio, it opens that portfolio to the possibility of greater loss or muted gains when benchmarked against the market as a whole.
There is also difficulty in quantifying the actual impact Values Based Investing provides to society. We do know that companies are recognizing the growth in the Values Based Investing trend. One example of this recognition is the Corporate Responsibility Reports that are made available by many companies to highlight involvement in environmental and social causes.
All of us should be evaluating where we invest our money. Values Based Investing will not solve the world’s problems overnight, but as companies see enough investors willing to intentionally invest their money, it moves conversations surrounding equality and ethical practices forward. If aligning investments and values is something you would like to learn more about, Stewardship Advisors would be happy to start that conversation with you.