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Investing in Values

Investing in Values

December 01, 2022
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Societal evolution has been ongoing since the dawn of humanity and society influences what current issues and guiding values we focus our attention on. Some of the biggest societal issues I’ve seen in my 47 years include climate change, gender and race inequality, and income/power inequality. Every person has the right to their own opinion surrounding these topics and their active level of support in the evolution of them, but it is clear the world is moving in the direction of advancing solutions and thus increasing the value of these key issues. 

In finance it is called ESG investing (Environmental, Social, Governance) and the views on this subject are beginning to change rapidly, and by some of the biggest institutional investors in the world. ESG investing may have begun with the notion of prioritizing “feeling good” about your investments over investment returns, but it’s currently being viewed in a much larger context. There’s an evolving view that climate change (Environmental), gender and race inequality (Social), and concentration of corporate power (Governance) are issues that each public corporation must address and make public.

From a purely investing point of view, investors are seeing more and more worth in companies that are transparent and vocal about these topics. If corporations are actively engaging solutions toward these issues, and thus placing more value on them, they are positioning their business for success. Investors are willing to invest more heavily into these companies and it’s probable their stock will outperform the companies unwilling or unable to adapt.

From a world and economic point of view, potential future global disruptions may be avoidable by addressing ESG issues now. The biggest risk for all investment portfolios are macro events which cause the majority of investments to suffer, such as the current pandemic compounded by the Ukraine war. Investing in stocks that address ESG issues creates a positive feedback loop that can enhance and stabilize returns for the world’s economy and therefore some of the worlds largest institutional investors are focused on investing in this sector.

I’ve been researching this trend for several years and 2 years ago I began incrementally incorporating ESG investing into portfolio diversification. ESG isn’t a silver bullet for higher investment returns or a more stable society, but it is an area of investing that is full of promise. However, ESG investing has only recently become mainstream and in turn there are limited investment options that have enough history to meet my investment standards. Just like with any investment, sound investing principles need to be incorporated into this strategy. I look forward to expanding my research in this area of investing and discussing their use in your portfolio during our Annual Review meetings in the first quarter of 2023.

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Photograph by: Ross Findon on Unsplash

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