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Values-Based Investing – Connecting Your “Why” to Your Wealth

August 1, 2022

What is values-based investing?

Do you ever wonder about the short and long-term social and environmental impacts of your investments? If so, you are not alone, and luckily there are investment vehicles available to help you align your investments with your values.

Values-based investing, or socially responsible investing, describes the process of choosing investments not just on their projected financial performance, but also on how they align with what matters to you, i.e. your values. For example, you may decide to screen out supporting companies that are involved with the sale of tobacco, weapons of war, or fossil fuels. You may also want to invest in companies with good ideas on how to make the world a better place like alternative energy or clean water systems, or that have excellent records on human rights and diversity.

It also challenges the more traditional notion that these issues can only be addressed through philanthropic or government funding. While these programs have good intentions, they mostly fail to achieve lasting results and encourage the kind of innovation necessary to solve complex issues.

Values-based investing empowers investors with the choices they make to move capital towards the changes they want to see in the world while planning for their own financial future. It creates the opportunity to use investments as an incredibly powerful source for good, both locally and globally.

A powerful trend is continuing to build

In a complicated and ever-changing world, more and more people are becoming aware of what their money is supporting and questioning if that is where they want it to land.

In a recent poll by S&P Global, 43% of women and 34% of men, indicated that a company’s stance on social or environmental issues was “very important” when deciding to invest. And there are three times as many mutual funds and ETFs that have been ranked for ESG performance (environmental, social, and governance) in 2021 than there were five years ago, holding more than $350 billion.

Sounds great, but isn’t it risky?

Like all investments, value-based investing comes with some degree of financial risk. Just how risky depends on many factors, but recent data shows that 74% of sustainable funds ranked in the top half of their respective investment categories in the past years.

There is also research that strongly suggests that investing with your values in mind, actually makes you a better investor. These investors tend to invest for the long-term and do not overreact to the ups and downs of the market. A study led by Centered Wealth demonstrated that while socially and environmentally themed investments themselves performed roughly equivalent to their traditional peers, the investor’s behavior resulted in increased returns of as much as 1.23%.

Investing for direct impact

Impact investing is a type of values-based investing where investments are made directly into companies that are striving for social and/or environmental outcomes, as well as a financial return. While the concept may be new to some, it has in fact been around for years. Impact investing is in fact, “A trillion-dollar trend most people have never heard of” (Morgan Simon in Real Impact).

The growing impact investment market provides entrepreneurs with capital to address some of the world’s most pressing challenges in sectors such as sustainable agriculture, renewable energy, conservation, microfinance, and affordable and accessible basic services including housing, healthcare, and education. 

Many investors also way any risks against the fact that they are supporting initiatives that are important to them, and the fact that they feel they have direct control over where their money goes – it’s not tied up in the volatile stock market, managed by someone else. They feel connected to the company and its initiatives while having a direct stake in the outcomes.

World Tree

World Tree is an impact-focused forestry company that offers values-focused investors with the opportunity to earn financial returns while creating tangible environmental and social benefits with an investment in renewable, eco-timber. Participating investors are also able to offset their carbon footprint through the planting of fast-growing trees and receive a share of any profits from the sale of the lumber.

World Tree is committed to empowering investors and removing barriers to participation. Investors in our 2022 Reg D Series may be eligible for full or partial coverage of their SDIRA fees. Find out more at World Tree.

*This site contains educational content provided by third parties.  NuView Trust does not endorse, recommend or approve any of the companies or individuals or investment vehicles or strategies that may be discussed.  NuView Trust encourages clients to seek legal or tax advice as necessary and to perform their own due diligence before engaging in any investment vehicle or strategy.