Invest Your Money Where Your Heart Is
More investors are aligning their passions with a balanced, values-based portfolio
By Kerby Meyers | January 27, 2021
Times are changing.
Where investment discussions once solely focused on returns and growth potential, more and more are delving into aspects such as corporate responsibility and broader impacts.
“I have clients who struggle to reconcile present-day discussions about climate change with their family’s legacy,” said Lynne Amerson, an investment manager in BOK Financial Private Wealth. “While it hadn’t been a concern in the past, they’ve started to say ‘The source of my money makes me uncomfortable, yet, I still need money, so what can I do about it?’”
Fortunately, a growing assortment of investment solutions allows Amerson to help such clients achieve some balance in their portfolio.
Incorporating an individual’s interests, passions, desires and distastes comprises the core of BOK Financial’s values-based investing. While still focusing on bottom-line returns, the approach encompasses a host of factors, according to Carrie Clasen Porter, director of strategic initiatives with BOK Financial Wealth Management.
“We want our clients to understand the possibilities that values-based investing offers: what it does for them and how their investments can reflect a commitment to issues that are important to them,” Clasen Porter said. “We are helping them take action to integrate their values more broadly, which can result in investors feeling much more fulfilled.”
Decades old origins
The roots of responsible investing trace back to the 1960s, when religious organizations excluded so-called “sin stocks” from their investment portfolios. In 1971, two ministers looking to avoid investing in companies that produced napalm, Agent Orange and other weapons for the Vietnam War founded the first publicly available mutual fund structured around a responsible philosophy.
Investing approaches influenced by other causes followed and frequently focused on shunning companies harming the environment or society. For example, some avoided stocks of tobacco or oil and gas companies, while others refused to invest in companies that operated in apartheid-era South Africa.
As awareness around broader corporate responsibilities to society, the environment and other non-stock owning stakeholders grew, so, too, did interest in investing in companies that prioritize positive impacts. That led to the growth of environmental, social and governance (ESG) analysis, which integrates consideration of traditionally non-financial measurements into investment decisions.
For example, a company expanding its usage of renewable energy will likely score well in an ESG analysis, as will one that maintains progressive hiring policies or one that follows robust diversity and inclusion guidelines for its board of directors.
“At one time, industry data showed that women and Millennials were primarily interested in an ESG approach,” said Clasen Porter. “That’s expanded into the general population; however, and with many of the events that have occurred in the last year’s unique environment, we’re hearing from more clients.
“They’ve had an opportunity to reflect and reassess many things—they want to invest in a way that makes an impact.”
Historically, the most common way for BOK Financial clients to marry their wealth and values has been through the creation of family foundations, Amerson said. That helped younger family members with little interest in investing connect with the family wealth in a purposeful way.
Values-based investing provides another meaningful approach for furthering the family legacy.
“A client may carve out a foundation to serve a purpose, but it’s not always possible to do that,” she said. “This way, the family can keep the assets invested in the trust and can link in the next generation.”
Shane Delavan, an investment team manager with BOK Financial Private Wealth, said the ability to connect with indifferent family members is another valuable benefit.
“Many clients are more interpersonal and creative than analytical, so when we talk about the quantitative aspects of their portfolios, they nod and hear us, but they’re not really engaged,” he said. “For those individuals, this provides a personal connection, which leads to different kinds of conversations because they’re more interested in what the money’s doing. They feel there’s more at stake.”
Clasen Porter said the values-based investing approach reflects BOK Financial’s mission as well.
“It’s such a natural fit for us, as we’re community-focused, client-centered and we do so much alongside our corporate values,” she said.
The time is right
More broadly, BOK Financial’s values-based investing syncs well with the broader investment environment.
“Awareness of responsible investing is rising; people have increasingly heard about it, although they’re not sure how it works,” Delavan said. “It used to be more of an underground concept, so now that it’s entering the mainstream, they’re delighted that their investment portfolio can reflect their values alongside their existing direct charitable contributions.”
According to the most recent survey done by the Forum for Sustainable and Responsible Investment, 33% of assets professionally managed at the start of 2020 were in a responsible investing strategy. That represented a 42% increase over 2017 levels and more than an eight-fold jump over 10 years.
Amerson said that growth has fueled a virtuous cycle, in which rising investor demand has prompted investment companies to develop different offerings, which has stimulated further interest.
“The industry has changed a lot,” she said. “Instead of simply screening out the negatives, you can invest with a fund manager who’s proactively looking at a cross-section of companies which are, for example, more beneficial to the climate.”
According to Clasen Porter, that ability to respond to client desires will only grow more essential.
“We’re embarking on one of the greatest transfers of wealth between generations, and it’s so valuable to connect around that,” she said. “By allowing for everyone’s views and the broader values of the family, all feel ownership and feel represented, which helps them come together as a family.”
Contact your advisor for additional information.
Investors should carefully consider investment objectives and risks before investing. The Department of Labor adopted a rule for ERISA accounts in January of 2021 that addresses the importance of financial factors in selecting plan investments. The rule can be found here.