Profit From Values-Based Investing [Q&A]

As you explore different ways to make a difference in the lives of those in your community and your world this holiday season, it may be time to take a close look at how your investments line up with what you value most.

Whether you’re investing your dollars in philanthropy or in a company, it’s possible to put your money where your heart is and make a significant return at the same time.

We caught up with U.S. Trust wealth management adviser Brian Sharpe to explain values-based investing.


What does values-based investing mean?

Brian Sharpe: Values-based investing stretches the traditional notion of philanthropic giving to incorporate an individual’s values throughout their life and their financial portfolio.

For example, you may invest in solar panels on your roof, buy fair trade coffee at your breakfast table or use pesticide-free fertilizer. With these everyday purchases, you are aligning your daily spending with your personal values. It is possible to make the same choices with your investments.

We see that more and more people recognize the close connection between social and economic issues. Companies are seeking socially conscious solutions to business challenges, which in turn drive innovation in how products are made, distributed and consumed. With these innovations come opportunities to invest in the kind of world you want to live in.

What do most people experience when they shift into investing in what they value versus investing in what may be more profitable?

Brian Sharpe: What a person values and what may be profitable are not necessarily at odds with each other. Companies that demonstrate and remain committed to policies and practices that make them competitive while advancing economic and social convictions in their communities not only meet the ethical criteria of socially minded investors but also stand best poised to prosper in a pure business sense.

It is, therefore, quite possible to invest in what you value and make a profit. Investors new to values-based investing often experience more customization and engagement than they are used to. This can lead to greater engagement in the investing process. We see that investors can become quite passionate about it.

If someone gives to one of their favorite charities during the holidays and they want to keep doing that, by changing to a values-based investing approach, would they have to give that up or do they work together?

Brian Sharpe: Charitable giving and values-based investing work together. Many charities will put your gift to work directly into their mission, such as feeding the hungry. Another charity might add your gift to its endowment and invest it to support its mission over the long term. In that case that charity’s endowment might take a values-based investing approach.

But many endowments and foundations are not aware of values-based investing or how to best implement it based on their specific values. For most investors, values-based investing is something they do in their own portfolio. From that portfolio, they then gift shares of low basis stock to their favorite charities, for example.

You might ask your favorite charity how your gift will be used, and how it invests its endowment.

What is the first step for someone who wants to get started in values-based investing?

Brian Sharpe: Values-based investing should be in the context of your long-term goals and overall financial plan. With those fundamentals established, values-based investing usually relates to the stocks in your portfolio, particularly U.S. stocks.

For relatively small investments, there are mutual funds and exchange-traded funds (ETFs). For larger portfolios, there are also separately managed portfolios of individual, actively managed stocks.

With help from a wealth management adviser, these portfolios can be customized to reflect your specific values rather than general ones. Connecting your personal values to your investing does not mean you have to compromise on portfolio performance.

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