Aligning Your Investment Portfolio with Your Values

Investing your money can do more than help you earn a passive income or save for retirement. When you build your investment portfolio based on your values and personal beliefs, you can further the impact of organizations working to better the planet, your local community, and more.

Explore how you can put your money to work for the environment or another initiative you care about through ethical investing, best practices for getting started, and statistics on sustainable investing.

What is ethical investing?

Ethical investing involves using your dollars to support organizations that uphold ethical values. Another name for this is Socially Responsible Investing or SRI.

There are two main strategies for SRI: ESG Incorporation and Community Investing. ESG Incorporation focuses on incorporating environmental, social, and corporate governance (ESG) criteria into investment analysis and portfolio construction efforts. Meanwhile, Community Investing can include a wide range of initiatives designed to provide capital, credit, and training to a community that would otherwise lack those resources.

You may wonder if ethical investing has any increased financial risks compared to that of traditional investing. Many studies have shown that sustainable investing requires no financial trade-off. In fact, sustainable funds may offer a decreased market risk. A Morgan Stanley study found that sustainable funds experienced a 20% smaller downside than traditional funds. In 2021, Morgan Stanley found that sustainable funds actually outperformed traditional ones during the Coronavirus pandemic, a fact confirmed by Morningstar’s 2021 Sustainable Funds U.S. Landscape Report.

In 2019, US individuals held $17.1 trillion in sustainable asset investment (which was 33% of professionally managed assets at the time). This desire to align investments with personal beliefs isn’t unique to a certain demographic. Across generations, individuals find it important to invest in what they believe in.

How can I align my portfolio with my personal values?

To align your portfolio with your personal values, you’ll have to start by defining what matters to you as an individual. Common values include:

• Environmental sustainability
• Gender and racial equity
• International human rights
• Humanitarian emergencies
• Animal welfare
• Historic preservation
• Support of the arts

Next, there are two ways you can approach building your portfolio. The first is with a negative screen. Through negative screening, you filter out corporations that do not align with your values. For example, if international human rights is your top personal value, you’d screen out corporations that rely on child and slave labor.

Alternatively, you can use positive screening to filter in good-fit corporations. For positive screening, look for corporations that are exemplary at supporting your values. If you are focused on environmental sustainability, you may start by looking at a list of the top corporations with the best carbon neutralizing efforts.

If you’re someone who doesn’t want to do a ton of research before investing, mutual funds may be a good fit for you. There are many mutual funds with a purpose out there, you may find that there is a ready-made portfolio fit to your interests.

No matter how you select organizations, it’s important to keep tabs on the corporations you’ve invested in. Take a look at their impact report. Are they upholding their values? Do they follow through on promises? Are they a benefit corporation? As a shareholder, you may also have the opportunity to vote on proxies. Be sure to use your voice where appropriate to continue to support your values. One benefit to working with a professional investment manager is they can also handle shareholder activism.

As corporations and their focus evolve over time, you may want to adjust your portfolio. If an organization no longer upholds your values, you should feel confident withdrawing your investment and adjusting accordingly. By divesting, you give up your influence at the company, but you also send a message to the organization about how their decisions impact shareholders.

How can I save for good?

At bunny.money, we believe that a direct donation is an efficient way to impact Nonprofit organizations and support volunteers in the field that are part of the solution. However, you don’t need to have a surplus of extra cash on hand to make a difference. Investing based on your personal beliefs can be an effective way not just to save for your future, but also to further environmental, social, and community initiatives you believe in. bunny.money makes it easy to save and give back to the organizations you care about the most. Get early access to our smart savings app that lets you effortlessly set money aside! From there, it’s easy to donate to organizations you love, with 0% fees!

Cover image by Paolo Vescia for Sustainable Conservation
First image by Karsten Würth.
Second image by Liza Summer.