Your financial goals are within reach, whether they are short-term or long-term. Investing can be a powerful tool to help you achieve them, but have you ever considered how closely your investments align with your personal beliefs? The companies you invest in play a role in shaping the world, and your financial choices may have a greater impact than you think.

Understanding Values-Based Investing

 

Companies sell shares to raise capital for new business initiatives, and by purchasing stock, you are essentially supporting their products, services, and corporate practices. As a result, many investors are turning to values-based investing strategies to ensure their money aligns with their personal ethics. But what exactly does that mean, and why does it matter?

Investing Without Awareness

 

Many well-educated, socially conscious, and environmentally aware investors unknowingly buy shares in companies whose values and business practices contradict their own. This happens for a few reasons:

• Lack of awareness: Some investors haven’t considered how their personal beliefs can influence their investment strategies.
• Inaccessible information: Others may not realize where their money is being invested.
• Desire to separate business from personal values: Some investors believe financial decisions should remain independent of personal convictions.

Why It Matters

 

The significance of aligning investments with values is a personal decision. However, it’s important to recognize that when you invest in a company, you own a piece of that company. This means you have an indirect role in supporting its practices, whether positive or negative. Consider asking yourself:

• Do I feel comfortable being a partial owner of this company?
• Do its practices align with my social, ethical, or environmental values?
• Would I knowingly support this business in other aspects of my life?

Voting with Your Wallet

 

How you invest can be a powerful reflection of your personal principles. For example:

• If you oppose industries like gambling or tobacco, you might choose to avoid investing in those sectors.
• If you support renewable energy, you may opt to invest in companies focusing on solar and wind power rather than fossil fuels.
• If diversity and inclusion are priorities for you, you might seek out companies with strong records in those areas.

A Growing Trend: Sustainable and Socially Responsible Investing

 

Values-based investing—often referred to as socially responsible investing (SRI), impact investing, or ESG (environmental, social, and governance) investing—is gaining momentum. Investors are increasingly considering both financial and ethical implications when making decisions.

This isn’t just a niche trend; it’s a growing movement. According to a Morgan Stanley report, 77% of individual investors globally are interested in investing in companies or funds that aim to achieve market-rate financial returns while also considering positive social or environmental impact. Additionally, 57% say their interest has increased in the last two years, and 54% anticipate boosting allocations to sustainable investments in the next year.

Does Values-Based Investing Affect Returns?

 

One of the biggest concerns for investors considering a values-based strategy is whether it impacts financial returns. The reality is that it depends on the specific investments you choose. While some values-driven funds perform exceptionally well, others may have limitations depending on market conditions and industry trends.

However, the investment landscape is evolving. Many ESG and socially responsible funds now compete with, or even outperform, traditional funds. Companies that prioritize sustainability, diversity, and strong governance often prove to be financially resilient in the long run.

Value-Based Investing: Finding Balance

 

At the end of the day, choosing between maximizing returns and investing according to your values is a personal decision. If faced with a situation where the best financial return comes from a company that contradicts your principles, you’ll need to weigh the trade-offs and determine what matters most to you.

Fortunately, with the rise of ESG-focused funds, impact investing, and socially responsible investment strategies, it’s becoming easier to invest in alignment with both your values and your financial goals.

Ready to align your investments with your values? Contact Navalign Wealth Partners today. Our team will help you create a strategy that reflects your principles while keeping your financial goals on track.