A few weeks ago, I started my 3-part Conscious Money blog series, starting with banking. Thanks to a client of mine who asked about how to ensure her dollars are not being invested in fossil fuel and war-related industries, she sent me down a positive rabbit hole of research about how to align your dollars with your values.
This week, I cover conscious investing, also known as values-based investing. Investing in socially conscious companies, funds, and securities has historically yielded comparably lower yields. But I think that’s a tradeoff I suspect many of us are willing to make in order to divest from industries that ultimately prioritize profits over people and planet.
3 Investing Strategies
There are three strategies to consider if you’d like to align your values with your investing:
1. Socially responsible investing (SRI)
SRI is the least expensive strategy of the three, and it seems to be the most accessible. It’s investing in companies, mutual funds, or ETFs that promote positive social change and excludes those that make a negative impact. For example, a climate forward investment portfolio will include solar energy companies and exclude fossil fuel ones. Many investment companies, such as Vanguard and BlackRock, already offer SRI options, so check with your financial advisor if you’re interested in rejiggering your portfolio.
2. Environmental, social, and corporate governance investing (ESG)
ESG investing is a more active form of values-based investing, focusing on companies that actively deliver benefits to society in some way. The Sustainability Accounting Standards Board is an oversight body that is working to standardize the way companies report on ESG criteria, naming five dimensions of sustainability: 1) environmental, 2) social capital, 3) human capital, 4) business model and innovation, and 5) leadership and governance. Kiplinger has a great list of ESG funds to get familiar with if you want to go this route.
3. Impact Investing
This final strategy is the most direct form of values-based investing, where your capital is used to advance values-based priorities balanced with financial return, such as building schools or activating economic activity in a low-income community. SoLa Impact is a great example based in my hometown, Los Angeles. They invest in affordable housing properties to turn it around for the community, rather than for profit and displacing gentrification. Funds like this, though, typically require investors to be certified with a proven portfolio and plenty of capital. I provide financial education to their non-profit arm, SoLa I Can Foundation, and it’s a beautiful model of “doing well by doing good,” which is the fund’s mission statement.
Forward-Thinking Investing Platforms for New Investors
What if you’re a new investor but you don’t know where to start? There are a few platforms that make it super simple, and I name a few here:
OpenInvest is a Robo-advisor platform with a mission to provide values-based investing. They have a number of channels to do this, including individual investing and investing products for employers. I started signing up for an individual investment account and will report back on how it went! So far, it’s a beautiful experience and this page alone got me really excited for it:
Ellevest is a female-founded, female-oriented, membership-based financial company that offers many different financial products, including banking, investing, and coaching. Their membership tiers are very affordable. As for the investing arm, you pay no advising fees, as the service is included in your membership fee. They offer an Impact Investing portfolio that promotes women in leadership, community development, and sustainable practices. These are their priorities, which tickle me so:
Betterment is one of the pioneers of Robo-advising and is the platform I personally use for two of my rollover IRAs. Their ears must have been buzzing as I researched this topic because only a week after, my dashboard introduced me to their values-based investing portfolios! Now, you can build your portfolio and choose one of three values to invest in: Socially Responsible, Climate Impact, or a mixture of both. I opted for both. (NOTE: If you sign up with the affiliate link I provided above, you’ll get a free year of portfolio management of up to $5,000. Betterment already has low fees, so a free year is the cherry on top .)
While some investment options like SoLa Impact require a lot of capital and a track record to invest in, OpenInvest, Ellevest, and Betterment allow humble or new investors like myself to start small. In all three cases, you can choose how much, starting from even $5/month, to invest.
Share in the comments if you invest at a high-impact investment firm or in high-impact funds! Would love to hear from you and hear about what I may not already know about.