Investing with Purpose
When working with an advisor to build a well-diversified portfolio, it goes without saying that it is important to discuss your financial goals.
How can you align your portfolio with your values?
Increasingly, investors are considering investments based on criteria that extend beyond financial considerations. Some investors may want to encourage better corporate behaviour or make a positive environmental or social impact. Others may want to align their portfolios with their own values and personal views.
There are two approaches that allow you to personalize your portfolio in a purpose-driven way:
- Sustainable investing
- Values-based investing
What is sustainable investing?
Sustainable investing incorporates environmental, social and/or governance (ESG) considerations along with more traditional financial measures:
Environmental investment considerations
Considerations include climate change, natural resource usage, biodiversity and pollution. Companies can reduce carbon emissions, invest in renewable energy or conserve water resources to reduce environmental risks and capture business opportunities.
Social investment considerations
Considerations include workforce well-being, product liability and social inequalities. Companies can advance gender pay equality, prioritize safe supply chains, create positive workforce relations and build strong cybersecurity systems to protect consumers.
Governance investment considerations
Companies can institute stronger ethics policies, improve shareholder voting structures and provide better transparency in their financial reporting to clearly reflect the state of the business.
ESG factors may be considered in the investment process as risks to the environment, society or key stakeholders, such as employees, consumers or shareholders. These may also be viewed as growth opportunities to innovate products and services to solve an environmental or social concern.
What is values-based investing?
Values-based investing helps align your portfolio with your personal values by excluding certain investments or targeting issues that are important to you. Values-based investing considers morally driven points of view defined by the individual investor, based on either their religious beliefs or personal values.
Values-based investing may prioritize a non-financial goal or theme over financial returns. For example, if you are interested in avoiding companies that do business in globally sanctioned countries, you may actively exclude those companies from your portfolio. If you want to express your religious views, you can buy and own faith-based funds that may exclude businesses that violate the religion’s beliefs. Faith-based funds may exclude industries such as gambling, tobacco and alcohol, and others may also actively invest in companies that do good for humankind.
We can help
It’s important to work with a financial advisor to determine the best approach to establish a portfolio that represents what is most important to you.