The Truth About Values-Aligned Investing

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How do you live your values?

Your value-set may be present in your work, the people you surround yourself with, and your words and actions. 

But did you know your money can also be a core part of that expression? 

More than ever, people are emphasizing the power and importance of aligning their money with their values in where they shop, what they buy, and where they invest. Values-aligned investing can be a meaningful, impactful addition to your investment strategy. 

You might be asking yourself:

  • What is values-aligned investing?
  • How does it work?
  • Will I have to sacrifice returns along the way?

Let’s explore.

Company Values Matter to Modern Customers

The values-based money movement has gained significant traction over the years. According to a study by Havas Media Group, 77% of consumers prefer to do business with brands that share their values

This means people are becoming much more conscious of what their money supports. Think about it: when given a choice, you’d probably rather spend money with a company that gives back to the community, treats its employees well, and cares about the world.

In addition to consumers’ emphasis on values, many buyers take it a step further. Havas also found that 55% of people felt companies played a more important role than the government in creating a better future. 

Other studies confirm these findings. Enzo’s World Value Index showed 81% of people believed that businesses could be a force for positive social and environmental change. People expect more from brands, and it’s an exciting shift. 

As it turns out, doing good isn’t just great for optics – it’s excellent for business. The same Havas paper concluded that meaningful brands (brands with a clear purpose) outperform the stock market by 134%. 

Research from Chief Executives for Corporate Purpose and Fortuna Advisors found that brands with a purpose will double their market value more than four times faster than brands with low-purpose

The wave of values-minded purchasing is stronger than ever, so how can you incorporate this into your portfolio?

Align your money with your values.

Learn how by speaking with a Financial Advisor today.

What is Values-Aligned Investing?

Values-aligned investing is the practice of investing in companies that reflect your values and ethics. For example, you may want to invest in companies that:

  • Have a clear charitable giving strategy
  • Prioritize carbon emissions and other environmental or climate factors
  • Operate ethically
  • Treat employees fairly
  • Support missions and ideas you care about
  • Invest in other companies that are doing good

Adopting a values-based approach adds another layer of intention to your portfolio. You can actively invest in companies and industries with similar values, bringing more purpose to every dollar.  

What’s in a Name?

You’ve likely heard of this concept before, but it may have been called something different. There are several ways to describe values-aligned investing, including:

  • Socially-responsible Investing (SRI)
    • Perhaps the most popular term, SRI represents a movement where people invest in companies that prioritize social and environmental good.
  • ESG Investing (ESG)
    • ESG stands for environmental, social, and governance. It’s a set of standards to evaluate a business’s operations and is a critical metric in socially-conscious investing.
    • Examples of environmental factors include green energy plans, carbon emissions, and general energy use. 
    • The social criteria evaluates a company’s business relationships like their suppliers, who they invest in, and charitable giving.
    • Governance refers to company operations, like shareholder engagement, accounting, and more.   
  • Impact Investing
    • Impact investing is most similar to values-aligned investing. People seek to invest in companies that generate a positive and measurable social and environmental impact.
  • Mission-driven Investing
    • With deep roots in religious communities, mission-driven investing often refers to investing in causes that align with an organization’s beliefs. 

While each of these concepts has its own nuances, they all fall into a similar category of aligning your investments with the things you care about most.

Values-Aligned Investing is Gaining Popularity

Even though socially responsible forms of investing have been around for a long time, the strategy has gained immense public favor over the last decade. 

A new study by NerdWallet found that 69% of people believe socially responsible investing is important.

But even though investing with purpose is a top priority, the study discovered only 23% of people reported that most of their investments aligned with their value set. 

Why the disconnect?

Perhaps the biggest reason for this imbalance is even though impact investing is meaningful, many people aren’t sure how to execute this strategy properly. 

What funds should they invest in? How do they know a company is actually following through on its promises? Will investing based on values hurt their overall returns? Can impact investing really make a big difference in the world?

With so many questions and few answers, people end up sticking to their routine investment strategy. So let’s clear up some of the confusion.

Looking for a better investing experience?

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MythBusters – Impact Investing Edition 

Investing in ways that align with your values seems too good to be true, so what’s the catch? Let’s explore and debunk some of the most common myths about values-aligned investing. 

Myth 1: Values-Focused Investing Means You’ll Have to Sacrifice Returns

This is by far the most common roadblock to sustainable investing. 

In the NerdWallet survey, people were skeptical of sustainable investments because they wanted to have the highest returns and felt that values-based criteria would hinder their progress.

But values-focused investing doesn’t curb returns. In fact, it might amplify them. 

An analysis by RBC Global Asset Management found that socially responsible investing doesn’t lower investment returns. The results also demonstrated a positive relationship between strong social, environmental, and governance factors and stock performance. 

When you think about it, this data makes sense. Evaluating these criteria allows for more complete and robust information about the company, leading to more effective investment decisions. A thoughtful, disciplined, and long-term investment strategy is perhaps the best recipe for extended success. 

And sustainable investments just might make you more successful than you realized. Morningstar found that 2020 was a landmark year for sustainable investments, as they actually outperformed traditional funds. And this growth trend is predicted to continue. 

Why are socially responsible funds performing so well?

Investing in a values-conscious way doesn’t mean investors throw caution and reason to the wind. It’s a legitimate strategy that seeks to balance goals and returns. You build a socially responsible portfolio with the same core tenets of a successful traditional portfolio:

  • Diversification (industry, company, location) in asset allocation
  • Risk tolerance
  • Risk capacity 
  • Time horizon
  • Goals
  • Tax-efficiency
  • Consistent rebalancing

As you can begin to see, tying your values to your investments won’t lessen your returns. Doing so might actually have the inverse effect. 

Myth 2: Impact Investing is Just a Trend 

Why spend all this time aligning your investments with your values if this is a fad that won’t age well?

Here’s the thing: values-aligned investments plan on staying put, at least if millennials have something to say about it (and they do). 

Millennials are now part of the Great Wealth Transfer and are expected to receive roughly $35 trillion from their boomer relatives. This drastic increase in purchasing power means this generation has some pull, and impact investing is an issue many care deeply about. 

A recent report highlighted that 88% of high-net-worth millennials are actively reviewing their investments for ESG impact. Plus, 89% expect their financial advisors to deeply research a company’s ESG factors and history before recommending an investment. 

Beyond millennials, Schroders Global Investor Study confirmed that 61% of people, regardless of age, felt that all investments should consider sustainability factors, not just ESG or sustainable-specific funds.

The numbers tell the story: impact investing is here to stay. 

Myth 3: You Can’t Track Your Impact

The whole reason to engage in values-aligned investing is you want your money to have an impact outside of your experience. That’s a worthwhile goal but one that many people find challenging to track. 

The same NerdWallet survey from above notes similar concerns. 

77% of investors don’t trust that companies will follow through on their socially-responsible promises, and 73% find it challenging to prove that companies are holding up their end of the bargain. 

But some powerful ratings can help give investors a clearer picture of how their ESG/impact funds are performing: 

  • MSCI ESG Ratings
    • This tool populates sustainability scores and tracks how companies are doing regarding ESG criteria. You’ll likely need to get this information from your advisor because most aren’t easily accessible online. 
  • Morningstar Sustainability Ratings
    • Morningstar created its sustainability tool to help investors tangibly see the impact of their investments. You can access these rankings by looking up the fund on the Morningstar website. 
  • As You Sow
    • As You Sow is a nonprofit that offers investors a comprehensive look at a company’s top sustainability factors, including fossil fuels, gender equality, racial justice actions, and more. 
  • US SIF: The Form For Sustainable and Responsible Investment
    • Here you’ll have access to financial firms, advisors, community organizations, nonprofits, and more dedicated to long-term sustainable investing. There’s a public view that lets you see the funds available via these members to compare cost, impact, and other metrics. 
  • Sustainalytics
    • This software offers a risk ranking for companies based on ESG criteria. The thought process here is that by not being ESG compliant, companies may face fines, penalties, or have to change their practices. 

There are many tools at your disposal to inform you how companies are doing regarding sustainability factors. This means you can feel confident your investments are genuinely having the impact you hope. 

The Three Pillars of Impact Investing

Impact investing isn’t black and white, there are a lot of gray areas. 

Here’s how you can consider impact investing. Break your investment choices down into three pillars:

  1. Invest
  2. Divest
  3. Engage

Then ask yourself:

  • Where do you want to invest?
  • What causes/missions/actions are most important to you?
  • Are there companies you’d like to divest from or stop financially supporting? What are your reasons behind this choice?
  • How can you better engage with impact investing as a whole? Perhaps you’ll dedicate a certain percentage of your portfolio to impact or value-related causes. Or you’ll plan to move most of your portfolio to reflect your values over a set period. 
  • What opportunities do you have to engage in the companies you invest in? How is your voice heard and brought to the table? Many fund managers will do proxy voting and shareholder resolutions on your behalf. That way, you can remain active and engaged in the companies in your portfolio.

One word of caution: try not to divest from entire industries or market sectors. For example, you may hate investing in oil, but you lose your vote if you take all of your money out of it. Sometimes it’s best to keep your seat rather than give it up, even if the table is a little wobbly. 

Plus, taking all of your money out of an industry can be harmful to diversification and risk. Impact investing doesn’t have to be exclusionary; instead, it’s an opportunity to shift more of your money to support the things that matter to you while building a well-structured portfolio.

Keep Your Wallet and Your Heart On the Same Side 

Today, investors seek more than just returns; they want their dollars to impact society. A powerful way to do that is supporting companies that better the world and avoid those that do the opposite.

Values-aligned investing lets you make an additional impact with your money while helping your finances be part of your life’s story. 

Investing this way brings more purpose and meaning to the process and has the potential to enact real and lasting change in the world. 

As you start to think more deeply about what values-aligned investing could mean for you, consider:

  • What are your core values?
  • How are you currently using your money to support those values?
  • Where can you make even more impact with your money?

At Abacus, we’re passionate about showing people what’s possible with their money. Values-aligned investing is a mindful commitment to use your money in ways that impact you, your community, and the world. If you’re interested in adjusting your portfolio to your values, let’s talk about it. Reach out to an Abacus advisor today. 


Abacus Wealth Partners, LLC (Abacus) is an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”), with its principal place of business in the State of California. Registration as an investment adviser does not constitute an endorsement of the firm by the SEC, nor does it indicate a particular level of skill, training, or ability.

The article is for educational purposes only and nothing herein should be construed as a solicitation, recommendation, or an offer to buy, sell, or hold any securities, investments or to adopt any investment strategy or strategies.  The Information and opinions presented in this article have been obtained or derived from sources believed by Abacus to be reliable and Abacus has reasonable grounds to believe that all factual information herein is true as at the date of this material.

This material is not intended to be relied upon as a forecast or research. The investment or strategy discussed may not be suitable for all investors. Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Investors must make their own decisions based on their specific investment objectives and financial circumstances.

More Information about Abacus’ advisory services and fees can be found in its Form ADV 2A and Client Relationship Summary (“Form CRS”), which are available free of charge and upon request. 

Past performance is not indicative of future results. Readers of this information should consult their own financial advisor, lawyer, accountant, or other advisor before making any financial decisions.


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