Should You Align Your Investments With Your Values?

Investing is becoming more and more accessible to the everyday person. From in-depth content on social media to a weakening stigma around talking about money and wealth, it seems more and more of us are opting to park some of our cash in the stock market.

But as a newbie investor, wrapping your head around the concept of investing in shares can mean you lose sight of what you’re actually putting your money behind. Here’s how we can approach investing without violating our personal ethics.

What are your personal values?

We all have our own set of values, and we uphold these in our everyday behaviors. From where we shop to what we eat — many of our decisions come back to our own values.

One of the best ways to begin understanding ethical investing or values-aligned investing is to look at your own set of values. What do you care about? What causes matter to you? What changes do you want to see in the world, and what do you use your voice to shout about?

From climate action, gender equality, trans rights, and anti-racism to stopping animal cruelty. Our values form an important part of the change we’re hoping to see, and can actually play a role in your investment strategy, too.

Factoring your values into your wealth goals

One important way of considering your values in your investment activities is to look at what wealth means to you, and how financial freedom could help you support the things that matter to you.

Think about what you would do with limitless money. What causes could you help? What change could you make? You can use this information in your investment decisions. For example, if you’re pursuing FIRE (Financial Independence Retire Early), you might strive for a FIRE number that allows you to allocate time and/or money toward creating change.

Are your values reflected in your investment choices?

Where our money goes is an important consideration when it comes to our values. Money infiltrates almost every area of our lives, so being discerning with how you invest your money and the vehicles you use to grow your own personal wealth is important when upholding your values.

Really look critically at where your money is invested, particularly if you’re investing in ETFs (exchange-traded funds) or managed funds. Do your own independent research into the practices and activities of companies you hold investments in, and see if these stack up to your values. You may find that your investments violate many of your personal values. For example, holding shares in a bank that funds coal and gas projects, or owning an ETF that contains Amazon shares.

How do you invest in alignment with your values?

Investing in alignment with your values is all about looking more deeply at companies and funds to see where your money is really going. You could start by exploring ESG investing (Ethical and Social Governance). This involves the use of different criteria to exclude companies that engage in certain practices.

With that said, not all criteria will align with your values either, which is why it pays to do your own research.

Does values investing mean lower returns?

Investing in alignment with your values means prioritizing ethics and values equally or more so than financial returns. For this reason, it’s important to weigh up the importance of your ethics and values against your financial goals. Of course, there may be investment options that balance both, but this comes down to research and monitoring over the long term.

Emma Edwards is a finance copywriter and blogger, on a mission to humanize the financial services industry by creating meaningful content that’s accessible and empowering. You’ll find her penning money tips at her blog, The Broke Generation, sharing financial insights on Instagram, or injecting life into content for her business clients.