Become A Client
Request a Meeting

What Type of Values-Based Investor are You?

Creative Planning
Last Updated
November 30, 2020
Woman and child viewing energy windmills

Setting Your Values-Based Investing Priorities

We all invest to make money, but a growing number of investors are also concerned about making a difference. These values-based investors strive to invest their money in companies that align with their values. They actively avoid putting their money with companies that go against those values or that aren’t good corporate citizens. A values-based investment approach can allow you to make both a profit and a difference, but if you’re going to achieve both, it’s important to determine what type of values-based investor you are. There are typically three categories:

Category #1 – Socially responsible investing

Socially responsible investing is the broadest type of values-based investing and typically means investing in companies that act in a socially responsible manner or strive to have a positive impact on society. Socially responsible investments avoid industries such as gambling, adult entertainment, alcohol and tobacco, child labor, firearms, etc.

Category #2 – Environmental, social and governance factor investing

Environmental, social and governance factor (ESG) investors are primarily concerned about the use of fossil fuels, human rights and equitable corporate governance. ESG investment screens typically include the following criteria:

  • Environmental – Environmental or sustainable investing strives to support companies that are good stewards of the environment and natural resources, while avoiding companies that have a negative impact on the environment. Screening factors may include the use of reclaimed products/packaging, safe disposal of hazardous materials, water consumption and management, energy consumption and use of renewable energy sources, impact on habitats and species, compliance with environmental laws and regulations, emissions of ozone-depleting substances, etc.
  • Social – The social component of ESG investing considers people and relationships. These are companies that behave as good corporate citizens and act in an ethical manner when dealing with suppliers, customers and communities. Specific criteria may include companies that strive to donate a percentage of profits to local communities, have safe working conditions, take into account shareholders’ interests, work with suppliers that share its values, consider diversity and equal employment opportunities in hiring, a commitment to customer service and high labor standards, etc.
  • Governance – Corporate governance refers to the methods by which a company is managed. Governance screens are intended to determine whether a company employs a diverse board of directors and whether corporate incentives align with the business’ success. Other factors include fair pay, executive compensation, anti-corruption policies, strong internal controls and rights for shareholders.

Category #3 – Impact investing

Impact investments are investments made with the intention of making positive, measurable social and environmental impact while also earning a financial return. These often include investment in sustainable agriculture, renewable energy, conservation, microfinance and affordable services such as housing, healthcare and education. Once you’ve decided what type of values-based investor you are, you’ll need to begin the process of screening for investments that align with your values, beliefs and investment objectives. Be careful, as it can sometimes be difficult to assess whether a company is truly upholding its values, or just telling investors what they want to hear. Because many companies self-report on values-based data and there is no single standard they are held to, it’s sometimes hard to know if they are living up to their promises.

The good news is, there are teams that specialize in values-based investing that can help you make decisions that are in line with your beliefs. If you’re considering a values-based investment approach, Creative Planning can help. Our advisors specialize in helping clients analyze socially responsible investments and will work with you to ensure your investment decisions are in line with your values, beliefs and long-term financial goals. If you’d like assistance with your values-based investment portfolio, or for any other financial matter, please schedule a call.

Let’s Talk

Find out how Creative Planning can help you maximize your wealth.

This commentary is provided for general information purposes only and should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

Recent Content

“Your wealth works harder when it works together.”

Peter Mallouk

President & CEO, Creative Planning

Get Your FREE Wealth Path Analysis!

Act Now - your exclusive offer to receive a customized roadmap for building your wealth ends Monday at midnight.

Serving Clients Nationwide

U

Please Enter Valid Zip Code

50

STATES & ABROAD

Providing financial peace of mind across the globe

$225

BILLION

Combined assets under management & advisement as of December 31, 2021