Investment Philosophy
Values Based Investing
Values Based Investing (VBI) is an investment philosophy that takes into account moral, ethical, environmental, and social criteria alongside financial criteria when formulating investment objectives. The term values based investing is often used interchangeably with other terms such as socially responsible investing (SRI), sustainable investing or ethical investing.
Values based investment practices in the United States dates back to the 1700’s when Quakers prohibited members from slave trading and weapon sales. Modern day VBI practices included religious groups forbidding members from investments in companies that profit from tobacco, alcohol, and gambling. Pressure toward corporations to divest from South Africa lead to the eventual end of apartheid.
Some refer to this philosophy of investment as “principle based investing”; aligning/structuring one’s investments in a way that mimic, support, or compliment their principles. Others might refer to this philosophy of investment as “ethical investing”.
Socially Responsible Investing
Socially Responsible Investing (SRI) is an investment philosophy that tends to be concerned with environmental stewardship and social justice issues. Socially responsible investors use their collective power to influence corporate governance for the perceived social good. Socially responsible investors might disqualify investments in tobacco, alcohol, gambling, weapon manufacturing, nuclear energy production, natural resource exploration and production (oil and gas), and companies and industries engaged in unfair labor practices.
Morally Responsible Investing
Morally Responsible Investing (MRI) is an investment philosophy which is a subset of socially responsible investing. Morally responsible investing is most concerned with the protection of life and the sanctity of family. Morally responsible investors might disqualify investments in companies that profit from (directly or indirectly) or promote (in some way through social and/or financial activism) any of the following: abortion and abortafacient drugs, contraception, embryonic stem cell research, and pornography.
Impact Investing
Impact Investing is an investment philosophy which is a subset of socially responsible investing. Impact investing tends to be concerned with environmental issues or social issues. The intent of an impact investment is to generate a “measurable” social and environmental outcome, as well as a financial return. This triumvirate concern (social, environmental, and financial) is referred to as the triple bottom line.
Although impact investments are made with the intent of generating financial returns, the primary purpose of an impact investment is to bring about a perceived positive change. Financial returns are secondary and intended returns can be above or below industry benchmarks.
Terror Free Investing
Terror Free Investing is an investment strategy that attempts to exclude investments in companies that have business operations in countries that the United States government considers to be “state sponsors of terrorism”. There are currently 18 U.S. states that have passed legislation to divest state pension funds of companies doing business with state sponsors of terrorism.
ESG Factors
ESG is an acronym for Environmental, Social, and corporate Governance. The ESG approach to investment analysis looks at a company’s “ESG actions” and the ramifications of their actions.
Environmental actions might include resource management, pollution control, and reporting and disclosure. Social actions might include product integrity, labor relations, and community impact. Corporate governance might include disclosure, executive compensation, shareholder rights, and accountability.
Increasingly, investment professionals are claiming positive correlations between ESG stewardship and corporate financial performance.
