Build a Bridge Between Your Financial Goals and Your Values
Build a Bridge Between Your Financial Goals and Your Values

Build a Bridge Between Your Financial Goals and Your Values



Nancy T. Bell
Nancy T. Bell

Wealth Advisor
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Build a Bridge Between Your Financial Goals and Your Values

The rise of ESG investing and how you can benefit.

What can I do about that?

It’s a question that seeps into our thoughts when we sense something’s not as it should be, whether it’s happening in our local communities —like homelessness, bullying, or economic inequality—or on a more global scale —like climate change, human rights, or violence.

We find ourselves searching for answers. We join clubs. We talk about it on social media. We raise awareness by marching or running for the cause. We support candidates who will fight on our behalf. We sign petitions and write checks.

In these days of constant global change and uncertainty, I view the question from an investor’s perspective. There are now a whole host of investment options to choose from that let us express our most important moral and ethical values.

Contrary to the adage, “You can’t have your cake and eat it too,” it is very possible to monetize your values in real ways and receive real rewards. It’s called ESG (Environmental, Social and Governance) investing.

The Move Toward ESG Investing

In recent years, more and more companies are making it easier to align investor values with their investments. Larry Fink, CEO of Blackrock, one of the largest mainstream asset managers in the world, noted in an annual letter to CEO’s, “Society is increasingly looking to companies, both public and private, to address pressing social and economic issues.” 1

This shift in corporate perspective is creating a real opportunity for investors like you to build a bridge between your values and your investments—to invest in those companies that are making a difference in areas you value on both a personal and financial level. Broadly defined as “sustainable investing,” the category includes strategies that fall along a spectrum, with ESG investing the most commonly used term. You may also hear this type of investing referred to as Socially Responsible Investing (SRI) or Impact investing.

To create ESG portfolios (i.e., a mutual fund) investment firms are now looking at companies that incorporate environmental, social and governance factors into all their business decisions. The portfolios are designed to reflect the values of individual investors who want to leverage their money to create wealth and effect positive change in their communities and around the world.

Screening for ESG

It might sound good (too good, maybe) to say that investors now can confidently stand behind their values while investing. I realize this idea trips up even the most conscientious investors. The most common question is “How can the investor verify the companies in a portfolio follow sustainable practices?”

Not too long ago, investment companies designed their socially responsible investment portfolios using what is called negative screening. If you did not want to invest in tobacco or alcohol, you sought out mutual funds that specifically omitted these companies from their portfolios. Or you just didn’t buy that ‘bad” company with the great stock performance.

Today, negative screening is used much less frequently, and quantitative ESG screens have been developed to filter out companies that have low ESG scores. Some of these screens include but are not limited to energy management, climate change policies, product safety and ethics, supply chain human rights, business ethics, and gender diversity.

Positive Correlation between Sustainability and Financial Performance

The question that comes up most often is “Can I make money by doing good?” And the answer is yes. Investors who go with ESG companies can “do good and do well” over the long-term.

A recent analysis of a large number of U.S. stocks from 1993 to 2014, ranked on the strength of their ESG commitments, shows that firms with strong ESG scores in top 20% of their peers yield twice the returns as firms with ESG scores in the bottom 20%. And according to one study, S&P 500 stocks with high environmental scores outperform their low-ranked counterparts.

Morningstar’s March 2019 U.S. Sustainable Funds Landscape report found that sustainable funds, on average, outperformed on a relative basis in 2018: 63% of sustainable funds finished in the top half of their respective categories. Only 37% finished in the bottom half.

And Morningstar also reported that on average, over the past four years, sustainable funds have held their own in up markets and outperformed in down markets relative to their conventional peers.

Demand for ESG Funds

Given the positive performance data and a sharp increase in investor demand, a record number of new sustainable funds were launched in 2018. Despite significant market headwinds, sustainable funds pulled in nearly $5.4 billion in net deposits in 2018. That marked the third consecutive year of record annual net deposits to sustainable funds and stands in stark contrast with the overall U.S. mutual fund universe, which netted its lowest calendar-year flows since 2008. In the first half of this year money has continued to flow into ESG funds. They have already surpassed the $5.4 billion collected during all of 2018 with deposits of $8.4 billion. The tide is definitely turning. Investors are making purposeful changes to how they invest their money, finding it rewarding to express their values by picking funds that specialize in socially responsible investing.

The Purpose of An ESG Investor

We come back to our question, “What can I do about that?”

Begin by defining and refining your personal values. You may not be able to support all of them at once, but a good starting point is to pick your top three and let those guide your initial investment selection. Become educated on the best investment options available that are most aligned with your values. Review your current investment portfolio and consider working closely with an investment professional to adjust and implement an investment strategy that places a greater emphasis on supporting your personal values.

Most of all, be ready to be a part of a sea change in the way companies and investors are effectively shaping and changing the quality of life in our communities and all over the world.

Note: This is part one of a two-part series on sustainable investing. Next we will specifically address how to go about matching your values with investments.


  • 1 Keefe, Joe and Gort, Julie. “Sustainable Investing and the Debate over Standards.” Investments and Wealth Monitor, May June, 2019.


Tags:  Do Good by Doing Good, ESG, ESG Investing, Financial Goals, Financial Planning, Investment Strategy, Sustainable Responsible Investing, Values

Note:  The content of this article is for guidance and information purposes only and is not intended to be construed as advice. Information provided is not intended to provide investment, tax, or legal advice.