How To Invest With Your Values
There is no easy answer to this question. However, you need to start somewhere and it can be helpful to begin by asking yourself which stance you would like to take. In what way do you want your investments to drive change? Do you want to invest only in companies whose operations and business model you fully support? Or do you also want to invest in companies who operate within areas you care about, but whose operations and/or business model doesn’t fully align with your values? Where do you draw the line? For example, if you care about climate change, should you invest in oil and gas companies?
Ready. Set. Invest with your values.
When I evaluate different investments, what should I look for?
As we have addressed in previous blog posts, within the field of sustainable investing, such as ESG investing and Impact investing, there is major room for improvement in creating tangible and reliable ways for investors to evaluate the sustainability and impact of their investments. This is especially true for individual investors (compared to institutional ones), which finuprise intends to change. Before that progress is made, we want to share what you can currently look for when evaluating the sustainability and impact of a company.
Business model: How does the company earn money?
Where to find it: Company website. Hopefully it is intuitively easy to find, and otherwise you can generally find it in the FAQ-section.
What is the bread and butter of the company you are considering to invest in? To what end does the company offer its product(s) or service(s)? Looking into the business model helps you understand the incentives of a company and to think for yourself how you think this contributes to solving issues within impact areas you care about, and if there are any potential conflicts of interest.
Sustainability report
Where to find it: Company website.
Another good source is the UN Global Compact database [1] where there is also a live tracker of how companies are progressing toward the UN sustainable development goals [2]. Important to note here is that the sustainability reports contain self-reported information about the company in question, so it requires a critical eye when reading. Below are some tips on what to look out for:
What is the report focusing on?
It should be focused on the area in which the company in question would have the largest impact (good or bad). For example, if a company operates in the energy sector, it is highly relevant to read about their carbon emissions and plans for future generation of energy, and less relevant to read information about how they employ environmentally-friendly behavior in their offices.
What are the numbers and objective facts?
Look at the small print! For example, if a company presents a high percentage reduction in emissions, make sure to check what the previous amount of emissions was, what it is now, and where in the business operations this reduction was achieved. If it is a whopping 80% decrease in emissions but it refers to a certain part of the operations and not a decrease in relation to the entire operations, it is certainly less impressive.
Third-party certifications and assessments
A major sustainability certification is currently that of B-corporation [3]. Certified B-corporations are legally required to consider the impact of their decisions on stakeholders of their business, such as employees, suppliers and the environment. These companies have gone through an extensive self-assessment which is then verified by the non-profit B-lab. The mission of B-lab is to serve a global movement of people using business as a force for good.
Third-party assessment and expert opinions in general can be valid for assessing a corporation from a sustainability perspective. Depending on what issues you are concerned about, you have to turn to different ones. For example, if you are particularly concerned about corruption, Transparency International [4] is an NGO providing valid information on the status quo and progress within this area.
Adherence to set norms
There are certain set norms guiding corporate sustainability, such as the Ten principles of the UN Global Compact [5]. It can be a good idea to check if a company is a participant of the UN Global Compact, which means that they have officially agreed to operate in accordance with these principles. Another factor to look at is which of the UN’s Sustainable Development Goals (SDG’s) [6] the company claims to strive for. This information can be found on the company website or in their sustainability report. Again, stay critical of all information that is reported by the companies themselves, and investigate whether they put their values where their mouth is.
Stay up-to-date with news
Where to find them: Online, physical newspapers or specialised magazines. Be aware that news can be biased too, read from multiple news sources.
It is important to keep up to date what is happening in real time with the companies that you invest in. As always, keep in mind that getting your information from different news sources helps you see an issue from different perspectives. This will give you a more comprehensive overview of the situation, help you assess it in the light of your own values, and enable you to make more conscious investment decisions.
For all of these categories, try to sift through the noise and look at any hard numbers, facts and official reports available. Greenwashing is not uncommon, and every company is biased towards putting themselves in a non-objective favourable light. As organizational units and as people, we all are to some extent. That is why, if you also want your investments to align with your values, it is important to stay aware and critical of the business models of the companies we invest in, the information we are presented with and to actively seek out objective information and third-party assessments.
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[1] https://database.globalreporting.org/
[2] https://database.globalreporting.org/SDG-12-6
[4] https://www.transparency.org/en/
[5] https://www.unglobalcompact.org/what-is-gc/mission/principles
[6] https://www.un.org/sustainabledevelopment/sustainable-development-goals/
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