Socially Responsible and Values-Based Investing

September 23, 2020

In our Christian walk, issues often arise that require us to consider our dual citizenship on earth and in Christ’s Kingdom. Jesus understood this conflict and told us that we were to live in the world, but not to be of this world. Although Jesus’ teachings could not specifically address all the issues in today’s modern world, He gave each of us the responsibility to use biblical principles and our God-given, sound minds to make everyday decisions.

One issue some of our clients wrestle with is how to responsibly invest their money. First, there is a general consensus that the Bible gives a clear stewardship mandate to strive for a good investment return (Matthew 25:14-30). Yet, earning a good return should not compromise one’s convictions in other biblical areas.

Before addressing this tension, it is helpful to remember that investing is just one stewardship responsibility of Christians, and it falls into the greater context of how we manage all of our finances. At Blue Trust, we provide “Wisdom for Wealth” based on biblical principles so that our clients can seek “Wisdom for Life.” That foundation of wisdom provides for a balanced life where all aspects of an individual or family’s financial house are built upon the unchanging truths of Scripture.

Our financial advice is based on the following tenets:
1) God owns it all.
2) Set long-term written financial goals.
3) Spend less than you earn (control lifestyle; have a budget).
4) Avoid consumer debt.
5) Diversify your investments.
6) Be generous.

These principles provide the context for sound financial decisions and the achievement of long-term goals. They also provide a backdrop for discussing specific financial issues like socially responsible investing (sometimes called ESG investing) and values-based investing (VBI).

ESG Investing
ESG stands for Environmental, Social, and Governance. This type of investing values companies that do everything from actively managing their carbon footprints to ensuring labor laws are upheld. These investments seek to generate positive returns but also to have a long-term impact on society, the environment, and the mission of the business itself. ESG factors are often used by investors who seek to reward and influence a company’s long-term health and values. For many investors, understanding the ESG factors of a company helps them understand corporate purpose, strategy, and general management quality.

Socially conscious investors practice ESG investing, not only for moral or environmental reasons, but also because they believe that rewarding these kinds of values will support a company’s long-term performance. They’re investing in sustainability itself and, for some, it’s a risk management move. These investors believe that investing in a company with notoriously unsafe workplace practices or a poor environmental track record is a riskier investment and could achieve inferior returns.

Values-Based Investing (VBI)
VBI (sometimes called Biblically Responsible Investing), is an investment approach that attempts to overlay a Christian value system onto the types of securities that are owned inside one’s portfolio. There are two primary ways that this approach can be implemented: 1) Using an avoidance strategy by screening out companies whose products, services, or values do not align with an individual’s value system, or 2) Choosing to invest in companies with a high level of alignment with an investor’s value system.

Because of the wide range of opinions on how an ESG or VBI approach should be implemented and the diversity of our client base, we have concluded that our focus should be providing high-quality investment options that address the investment goals of our clients. Values are a deeply personal topic and the decision to overlay a value system on one’s investment program is a personal decision that clients must make for themselves. Our advisors have tools and resources to objectively educate our clients in these areas. In that process, if clients desire an ESG or VBI approach for their investments, we can work with them to align those wishes with their investment goals.

If you have any questions about incorporating ESG or VBI investing into your portfolio, please contact your Blue Trust advisor, or email blog@bluetrust.com.

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