Value, Values, and More Values – 3 Important (But Different!) Conversations About Sustainable Investing
Sustainable investors talk a lot about values. The connection between the two is intuitive – it just makes sense to most investors – but the conversation itself, sometimes, gets garbled.
People often have differing ideas about what “values” means. Traditional investors might focus on a company’s enterprise value, or its valuation, which captures how much investors are willing to pay per share. There’s value as an investment style, and “finding value” is a good way to describe a well made investment decision. And that’s before we talk about the thing that matters most to many sustainable investors – values as a reflection of your personal beliefs and priorities.
So in an effort to clear things up, let’s talk about the most important aspects of “values.” In our experience at Till Investors, there are three discussions about values that need to be considered by sustainable investors. Two of them will probably be familiar, but one is a conversation we almost never see in the investment world – and naturally it is probably the most important.
Value
The first conversation revolves around the financial value of your investment. The primary purpose of all investing is to secure your long-term financial wellbeing.
Fortunately, sustainable investing has an excellent track record. We talk often about an NYU/Stern Center for Sustainable Business metastudy from 2019, which aggregated more than 1,000 studies about sustainable investing performance. Bottom line, according to the study: sustainable strategies perform as well as, or better than, traditional strategies.
More recent results have been compelling as well. A year-end 2023 study by Morgan Stanley’s Institute for Sustainable Investing, using Morningstar data, found continued performance success over the past five years for sustainable strategies.
To be clear: outperforming traditional strategies isn’t really the goal. The goal is to ensure that pursuing sustainable investing won’t automatically hurt you financially. On that front, the results are positive. That frees sustainable investors to move away from a conversation about “can I afford to sacrifice returns to invest sustainably?” Rather, the focus can be, “which sustainable funds have the best performance and risk profile to suit my needs?”
Values
The second conversation is about the investable values you want to consider when choosing what to support with your money. Investable values are what are typically meant by the label ESG: environmental, social, and governance expectations you may have of business you want to invest in.
There is no shortage of ESG fund choices. Some invest across the market, focusing on ethical business practices like transparency and good employee relations. Others dive deep into strategies that support climate solutions, gender equality, racial justice and several other meaningful, non-financial goals. You can find more examples in numerous categories by exploring Till Investors’ latest Fund Manager Profiles.
As we describe in our book, the conversation about investable values revolves primarily about setting personal priorities, finding investments that fit those priorities, and finding ways to incorporate those investments into your portfolio.
And More Values
But let’s talk broader for a minute. Investable values are important, but they’re also a subset of your personal values – the foundational beliefs that guide decision making in all areas of your life. At Till Investors, we like to say that people use their values to make all their life decisions – why shouldn’t that apply to investing too?
Recently, think2perform, a leadership consultancy informed by the science of behavioral economics, developed a deceptively simple values exercise to help advisors work more effectively for their clients. Some ESG investable values are included, but the tool also includes concepts like independence, creativity, service, or family. It starts broad and narrows down, forcing the user to think through which values matter the most over the long-term.
Behavioral research suggests that the best way to help individual investors make the right financial plans – and to keep them on course as circumstances change – is to ground all decisions in a consistent set of personal values. Think2perform’s goal is to make investing – and financial wellness – more sustainable at the individual level.
Keep Talking
When Till Investors talks about a “new way to money,” this is what we mean. It’s an approach to using and investing your money that respects all of the values that matter to you – financial and personal. The conversation may be tricky at times, but it’s well worth having.
