In today’s world of Investment, ethical and sustainable investing is no longer a niche concept. More and more individuals want their money to work for them in a way that aligns with their personal beliefs and contributes to a better future. But how can you make your investment portfolio truly reflect your values? Forget the headlines about university endowments and complex divestment campaigns – let’s focus on you.
Know Your Values about Investment portfolio
The first step is to identify what matters most to you. Ask yourself:
- What causes do you support? Environmental protection, social justice, animal welfare?
- What industries or practices do you want to avoid? Fossil fuels, weapons manufacturing, exploitative labor practices?
- What positive impact do you want your money to have? Supporting renewable energy, promoting diversity and inclusion, advancing medical research?
Once you have a clear understanding of your values, you can begin to align your investment choices accordingly.
Investing Strategies for Values-Driven Investor’s Investment
- ESG Investing: Environmental, Social, and Governance (ESG) investing involves selecting companies that score highly on criteria related to sustainability, social responsibility, and ethical business practices. This is a great way to ensure your investments are making a positive impact.
- Socially Responsible Investing (SRI): SRI goes a step further than ESG, actively excluding companies or industries that are considered harmful or unethical, such as tobacco, firearms, or gambling.
- Impact Investing: This approach focuses on investments that generate measurable social or environmental benefits alongside financial returns. This could involve investing in companies that provide clean water solutions, affordable housing, or educational resources.
- Values-Based Mutual Funds and ETFs: Many mutual funds and exchange-traded funds (ETFs) are designed to align with specific values, such as environmental sustainability, religious principles, or social justice.
- Shareholder Advocacy: If you own individual stocks, you can use your shareholder voting rights to influence corporate policies and advocate for changes that align with your values.
Do Your Research
It’s important to do your due diligence before investing in any company or fund. Look for transparent reporting on ESG factors, impact metrics, and shareholder engagement practices. Seek out resources and information from reputable organizations that specialize in sustainable and responsible investing.
Your Portfolio, Your Impact
Remember, every investment choice you make has the power to shape the world around you. By aligning your portfolio with your values, you can ensure your money is not only growing but also contributing to a future you believe in.
Since a person’s investment decision is connected to their psychology, which, in turn, is affected subconsciously by narratives, there can be no real guarantee that an investor’s portfolio will be in the green all the time. There are certain investment approaches that can keep you a foot ahead of the headwinds, or at least help you stay prepared.
The true test of value investing, though, comes from the fact that the strategy requires one to take absolute control of one’s emotions while investing. Behavioural biases, emotional attachment to certain investments, and overreaction to temporary news are some of the pitfalls that the value investor needs to avoid in order to emerge successful.
Momentum investing: A momentum approach to investing is when asset managers invest in financial assets such as stocks, indexes, derivatives, bonds, or commodities that are on the upward trend given their strong recent performance while selling those that exhibit poor returns. The strategy is based on the belief that the assets that have been performing well in the recent past will continue their upward momentum. The core premise of this approach is that once market trends have been established, they tend to persist for a while owing to factors such as investor psychology, herding behaviour, and information dissemination.
Value investing: One of the soundest approaches to investing, the value investment philosophy is both simple and profound. It is the practice of buying stocks of sound businesses at a discount to their intrinsic value. An objective approach to value investing requires investors to make their investment decisions based on business fundamentals and research.
Need Help?
If you’re unsure where to start, consider consulting a financial advisor who specializes in sustainable and responsible investing. They can help you create a personalized investment plan that aligns with your values and financial goals.
Ready to take action? Start exploring your options and make your investments a reflection of who you are and what you stand for.