A Registered Investment Advisor

For an overview on Socially Responsible Investing please see Part 1 of this series here: http://www.sribend.com/the-new-values-investors-part-1/ Investors looking for some simple steps they can start to take to move their portfolio toward aligning more closely with their goals can read on below.


Investors that are thinking through how to move their portfolio to align more closely with their values should consider a few steps: Decide what your values are; look at where markets, cultures and economies are going; pick industries, sectors, funds, and companies that express your views.

1. Decide what your values are.

We vote in political elections every few years, taking to the ballots to express our views on certain policies by voting for individuals or parties. How much does our vote matter? Hard to say, it certainly matters, but the impact is hard to measure and if your politician lost can you really do anything until the next term rolls around? Thankfully there is a another way to express your views. Every single day in every single transaction you vote with your dollars – both in the products your purchase as a consumer and in the way you allocate your savings and capital. Making this vote count is at least as important as your election ballot vote.

First of all, if you do not have any investments and all your savings is just sitting in some bank savings account (earning very low rates – but that’s another discussion) then believe the bank is investing those dollars for you (and earning the profit from it) and you have very little control and no idea what the bank is investing your money into. It might be great ethical company or in a company that may act immorally and furthers the exact things in life that violate your values.

Think about this, perhaps you live in Oregon and believe in the slow food movement, you shop at farmers markets, you buy organic, but your 401k includes an S&P 500 market index, one of the most common investments, you may  have no idea that your 401k is investing in Monsanto – a manufacturer of GMO seeds and pesticides. If you do not think about how you allocate your capital you are missing out on an huge opportunity to make the world a better place.

Decide what your values are. Generally when it comes to investing there are three broad categories of values:

  • Sustainable: This includes companies that are in industries like alternative energy, or companies that consider their environmental footprint as they manufacture their products
  • Responsible: This generally refers to corporate governance, company culture, and treatment of workers. Responsible companies may pay higher wages, have a designated board member that represents employees, etc.
  • Impact: This refers to actively seeking out companies that are selling products that you believe in, or industries you want to see thrive. Maybe you believe in the benefits of home gardening so you seek out a company that distributes hydroponics equipment.

Once you have outlined your basic values it is time to move on to expressing those values and considering the investment implications of those values.

2. Look at where markets, cultures, and economies are going. Quite often investor values are linked to emerging trends in the consumer economy. After identifying your values, the next step is to consider the macro-trends of those values and decide on possible investments. For instance, looking at fossil fuels. Let’s take an investor that believes that the extraction of fossil fuels has an overall negative affect on the environment – they have defined their value – the next step is to look at the macro trends in the economy and decide if the alternatives to fossil fuels and the related industries (electric cars, wind energy, etc.) will be growing sectors to invest in over the next 5, 10, 20 year investment horizons. These trends will be driven by consumer and business demand for their products and services. If an investor believes that demand for these products and services will increase, then investors can advance to finding a way to invest in companies, funds, sectors, or industries that reflect that emerging trend and value.

One of the fundamentals driving the long-term positive view of socially responsible investing is that consumer and investor demand for socially responsible companies, products, and investments will itself be increasing over time. A principle we will explore in the future is the idea that investors adopting an SRI strategy today are on the leading edge of a trend and will benefit as more consumers and investors take note of this trend and allocate capital to it in the ensuring quarters and years. More on this idea soon. After examining trends, investors can advance to the final step.

3. Pick your sectors/industries then your funds/companies. This is where the fundamental finance work comes in. Picking investment managers or funds that reflect the values and trends decided on above is part art and part science. Quantitative metrics can be utilized to evaluate funds or managers (for instance: Information Ratio, historical returns) and qualitative factors can be considered as well, for instance, an investment manager that formerly worked in alternative energy may have an advantage when evaluating solar investments. A number of organizations publish scores for different funds or companies related to Socially Responsible Investing. Socialfunds.com is a great resource as well as US SIF (http://www.ussif.org/). Morningstar has added a metric to their fund statistics that mark funds as “socially responsible”.

In future posts we will be breaking these strategies and steps down even further to provide more specifics on how to think through this process and how to implement these strategies into a portfolio.

We are happy to answer additional questions or provide more information. Please email the author: ryan [at] cascadefs.com for additional information. Cascade Financial Strategies is a Registered Investment Advisor.

Investment Advice is offered through Cascade Financial Strategies, a registered investment advisor licensed in Oregon and California (We also operate in other states under the “de minimis” exemption, meaning having five or fewer clients within that state).
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