Your Investments, Your Values

©2017 Kimberly Terry, CFP®, AIF™

While Americans were making millions from slavery before the Civil War, some chose instead to invest in an Underground Railroad to help slaves escape. Today, that same spirit can be seen in the creation of a new “railroad” that is helping LGBT refugees escape from Uganda where the punishment for homosexuality is life in prison.

Our country's history is tied to a rich tradition of social responsibility and activism.  It is also closely tied to the long tradition of investing that has helped grow the world's richest economy.

Today's investors face a series of challenges that begins with looking for successful companies with a proven track record of profitability. But, as you consider investment options, you also may find yourself considering other questions. Is the company committed to protecting the environment? Do their business practices demonstrate an involvement in social justice? Do they operate their business with transparency? Are their employees treated well? Can I even ask these questions if I want my investments to make money?

The answer is yes; welcome to the exciting world of Sustainable Responsible and Impact Investing (SRI).

The concept of aligning profitability and social responsibility really began to take root about thirty years ago. The dramatic growth of this investment approach over the past decade not only represents changes in corporate culture, but also an ever-deepening level of awareness on the part of individual investors.

Our world is changing. There was a time when the lack of connection between financial and social consciousness information led many wealthy investors to separate their desire for profit from their genuine desire for altruism. They would earn money on their investments and then demonstrate their care for others through philanthropy.

Today, the rapid proliferation of local, national, and global information, combined with a commitment to sustainability and responsibility, has also created a rapidly growing interest in sustainable responsible impact investment advising. Through SRI advisors, individuals have access to a form of investing that allows them to earn competitive returns across all asset classes while also using their money to make an impact on the issues that matter to them the most.

Like all professional financial advisors, SRI specialists have the resources to present their clients with investment opportunities based on their desire to earn competitive returns and their acceptable level of risk. However, SRI advisors also have the expertise to present clients with more detailed information that can track a company's commitment to issues of environmentalism, social responsibility, or corporate governance (ESG).

SRI investing begins with the same goal as traditional investing – identify profitable companies with a track record of success that would be good investment opportunities and overlays a qualitative analysis of potential impact on shareholders, stakeholders and the community at large.  According to the US Sustainable, Responsible and Impact Investing, Trends 2016, after years of growth, SRI has become a mainstream investment discipline, now representing 20% of all professionally managed investments in the United States.

Many people assume, when first learning about SRI investing, that there will be a natural predisposition of age, gender, religion or politics among those seeking socially responsible investment advice. This is not true and that is one of the key reasons why this sector is growing so rapidly. A Morgan Stanley report from 2015 shows that 71% of Americans are interested in socially responsible investing. While studies have shown that women and millennials are more focused on SRI investing, concerns about the environment, humane treatment of workers, human trafficking, product safety, or corporate commitment to labor and community have also been breaking down demographic barriers.

Ultimately, our country's economy is based around a capitalist system which must, should, and always will make profitability their highest priority. At its core, SRI investing does not represent a shift away from the importance of earning competitive returns but rather a fundamental shift in an understanding of the factors that lead to a company's success. This was recently explained clearly and succinctly by billionaire investor Warren Buffett, who said, “In times such as these, a company must invest in the key ingredients of profitability: its people, communities, and the environment.”


Kimberly Terry is an investment advisor representative of First Affirmative Financial Network, LLC (First Affirmative), a wholly owned subsidiary of FOLIOfn, Inc. is a Registered Investment Advisor (SEC File #801-56587) specializing in sustainable responsible, impact investing. (The credentials CFP® and AIF™ listed above bear a trademark.)