Are you ready to get started aligning your money with your values? Follow these easy, actionable tips to kick-start your journey.
By EB Content Studio
Corporate Responsibility. Clean-tech. Fair pay. As allegoric as these turns of phrase may sound in conventional business, many investors are now basing their investment decisions on such principles. Investors are beginning to align their values with their investments.
Many people believe that they can make a difference with their investment dollars by avoiding companies with questionable records and focusing on those that take responsibility for their actions. This strategy is the basis for Socially Responsible Investing (SRI.).
Investments may be one of the most focused-on parts of your financial plan, with much of that attention on monetary reward. But your investments can reach well beyond the bottom line – and even your own lifetime – if your financial plan is aligned with your personal values.
Logically, it’s imperative to ensure that your investments fit within your financial plan and life goals by thinking about time frame, how much risk you can endure and keeping cash on hand for emergency situations. But beyond that, matching your personal values to investment choices can have a big impact on your life and that of future generations.
In spite of of your financial and life goals, incorporating your own values takes things to the next, more significant level.
SRI is in vogue in Kenya and Africa today with scores of investors aligning their investments with their values and searching for investments that do better on things like carbon emissions or governance.
If you want to practice SRI but are hesitant where to begin, here is a seven-step to-do-list:-
1.Value-Based Budgeting
The first place you should look to realign your money with your values is your budget. Where you are spending your money is a clear gauge of what you prioritize in your everyday life. To start this process, do a little bit of introspection. Consider what brings you joy and what things you value most in life.
Once you have a list of your values or specific parts of your life that make you happy, look at your spending. If you currently have a budget that you stick to, bingo! You can look at your existing budget and evaluate purchases for a certain period and realign accordingly.
2. Are your current investments aligned with your values?
By defining which values are important to you, you can begin negative screening. Negative screening removes the companies that do not share your values. For example, as an investor who values strong business ethics, avoid investing in companies that are regularly fined for their actions (or inactions). If human rights are important to you, then you will likely want to screen out corporations who violate child labour laws. The most common negative screens are for tobacco and alcohol.
On the flip side, you can also run a positive screen. Positive screens look for the best rated companies related to your particular concern. For instance, many companies are highly proactive in reducing their greenhouse gas emissions, and the emissions of their products.
3. What you invest in
Invest in companies that consider environmental factors like climate change, social factors such as gender equity and racial justice, companies that treat their employees well, care about their communities, and that care about their stakeholders and not only their shareholders.
4. What you’re buying and where you’re buying from
This is where being a conscious consumer comes in. Consider purchasing something responsibly made and from a company that supports your values.
5. Consider Charitable Giving
Are you avid about supporting organisations and causes that matter to you? The truth is that many charities and organisations hinge on end-of-year giving to finance their various programmes because that is when people feel most motivated to give. Give intentionally and not only to service based organisations, but also to social justice causes that have been traditionally underfunded (and still are woefully underfunded). These types of organisations are focusing on the root causes of social, racial, economic and environmental injustices.
6. Is your financial advisor socially responsible?
Some investors have long been in favor of social responsibility or socially responsible investing (SRI), that is, putting their money into ethical companies that sell products that are good for the environment and society at large, and do so with sound corporate governance.
You may be among those investors or be eager to get in on the trend. If either is the case, how do you find a socially responsible advisor or planner? Essentially, you use the same methods that apply to locating any financial investor or planner, with the exception that you use the lens of SRI to narrow your search to one with that specialty.
7. Consider Impact Investing
The point of impact investing is to use money and investment capital for positive social results. Impact investing can eradicate poverty, wipe out hunger and attain food security, expand access to quality healthcare and education, achieve gender equality, and ensure justice and promote peace – just to name a few goals. And it can be done anywhere, by anyone. The benefits of impact investing include reduced risk for individual investors because they can diversify their portfolios; increased opportunities for social enterprises because they can get more funding; and positive impacts on populations through improved business practices and new jobs creation
8. Invest in Green Startups
The incentives to invest in green tech may start with concerns about environmental risk factors, impact on the environment, and a desire to avoid negative public relations. And it’s important to note that sustainability initiatives deliver significant environmental and public health benefits that are strong incentives on their own.
But today, enterprises and cities are also seeing the ROI of environmental practices in business. These include operational efficiency, cost savings and government incentives, as well as favorable Environment, Social and Corporate Governance (ESG) ratings. Advancements in green technology have delivered tangible value for everything from industrial facilities to retail to supply chain management.
Hence, consider investing in green-tech startups and indirectly, you could be playing a key role in reducing pollution and waste products of traditional industrial processes. In addition to reducing the negative effects on the natural environment, such clean-tech startups also use resources more efficiently. For example, sustainable agriculture initiatives can prevent the soil damage associated with crop monoculture, and sustainable building materials are less likely to be depleted. Secondly, replacing fossil fuels with renewable energy startups would reduce the burdens on the workforce and health sectors, not to mention the benefits of reducing global climate change.
9. Consider where you bank
Socially responsible banks ensure that the money deposited into your bank account gets used in ways that create positive environmental and social impact.
As the push for sustainability in business and net-zero grows across the globe, the demand for going green has hit the financial sector also.
Sustainable banking involves strategic planning and execution of banking operations and business activities while taking into consideration the environmental, social and governance (ESG) impact. Banks stand to play a major role in achieving the United Nations’ Sustainable Development Goals (SDG).
Banks and financial institutions can support the quest for net-zero with finance offers, loans and investment schemes for green projects, thus lending a hand to individuals and companies that are treading the path to sustainable development. Internally, banks can incorporate sustainable banking practices in their operations, human resources, and management of physical assets.
Hence, consider banking with banks that demonstrate commitment and act on internal and external sustainability initiatives. Such banks will ultimately have competitive advantage.
10. Join an Impact Investing Network
Impact investing represents a shift in thinking among many sectors: foundations and family offices, venture capital firms, fund managers in public and private markets, social enterprises, corporations, policymakers, and researchers, to name just a few. It is also a relatively new field, with all of the fits and starts associated with building and creating.
As impact investing grows, so does the need for investment networks to connect these often disparate groups driving the field’s progress. Impact investing networks serve three key purposes for the individuals and organisations that they bring together:
- Sharing Data
Sharing data is the bedrock of most impact investment networks. As new approaches and ideas emerge among practitioners, the lessons learned and the data collected can be invaluable tools for identifying best practices, especially within a particular sector.
- Building Credibility
Impact investment networks also help build credibility within and beyond the field. This can include establishing a baseline that network members must meet, or empowering the network to advocate for global changes with a consistent message.
- Fostering Opportunities
Lastly, impact investing networks facilitate connections among its members to drive dealflow and other opportunities. GrowInclusive—a project of the World Bank, IDFC, and the World Economic Forum—offers an investment network matchmaking platform for its members to find ways to scale their impact through partnership-building.