May 12, 2021
I still believe it to be relatively impolite to discuss the 2020 election in mixed company, so I won’t. But didn’t I just already mention…? I won’t.
More meaningfully, you have probably heard the maxim about “voting with our dollars,” and that is something that we can and should talk about. At least it merits consideration insofar as your investment dollars are concerned.
This idea acknowledges that choosing what we do with our money, both the purchases we make and those we avoid, can effect considerable change in our world and may even help to create the world we’d most like to live in.
For example, if your portfolio would benefit from exposure to the telecommunications industry and you are given the choice to invest in a company that embraces diversity and inclusion on its corporate board versus a company that doesn’t, the decision you make benefits the financial standing of the company you’ve chosen.
Other companies will take note that investors value diversity on corporate boards and will begin embracing the ideal as well, thus leading to more companies with diverse boards.
Congratulations, you’ve just changed the world.
Step 1. How do you want the world to change?
Maybe you envision a world that is less polluted, relying less on disposable plastic bags and more on reusable totes that clog your closets and collect in your trunk.
With your children and grandchildren in mind, the future world you want to help create might be one with fewer greenhouse gas emissions and more wind and solar energy infrastructure.
In your own future eutopia, you might envision a more equitable world, one in which positions of power are held proportionately, relative to the general populace, across the racial/ethnic spectrum. Perhaps your focus is in improving workplace gender ratios or reducing global conflict and social justice disparities.
If you are like me, all you want is the flying cars we have been promised since the Jetson’s got us warmed up to the idea decades ago. Investing in the right places can help us get there.
Step 2. Know which criteria to choose from
For the ways in which you’d like our world to change, there are inevitably a number of companies and investment strategies that already exist and focus in that space and can help you achieve those goals.
Shareholder value theory, popularized in the 1970’s, has held strong for many decades as a key component of a capitalistic society. The theory rests on the belief that companies’ only goal is to increase shareholder value. This means that a company’s charge is, primarily, to grow its stock value to benefit its shareholders.
Over the years, as executive management has focused heavily on short-term gains in a company’s share price, it has oftentimes had a negative impact on stakeholders in the companies.
Stakeholders are more than just the company’s shareholders, they are also its suppliers, distributors, communities and customers. A good way to think about the way the investment world is shifting, and how it is likely to continue shifting given millennials’ intense focus on more holistic measures of “value”, is in asking companies to increase stakeholder value, as well.
Enter socially responsible investing (SRI). SRI was a precursor to what is now known as environmental, social and governance-focused investing (ESG)
Environmental goals might include a focus on greenhouse gas emissions, climate change policies, “green” products and technologies, and water conservation and usage.
Social goals could include employee treatment and pay, ethical supply chain sourcing, and diversity and inclusion in the workplace (in both hiring and advancement).
And corporate governance goals might include analyses of a company board’s diversity, an understanding of the company’s metrics that drive the businesses’ value, and transparency of shareholder communications.
Step 3. Know your own financial goals
In step one you worked to understand how you want the world to change, and in step two you began to understand the ways in which you might consider a variety of investment options with an eye toward the metrics used to quantify a company’s performance relative to its peers.
Now you can look for the place in your own portfolio to put your dollars to work and to make that vote count.
Knowing your investment return, tax efficiency and estate plan needs remain central to any investment decisions that we make, and those needs are most often clarified and adhered to by completing and regularly reviewing your financial plan.
Step three is to rely on the professionals in your life, including a Certified Financial Planner, to help you build the plan that will ultimately dictate that the right kind of investment suits not only your family’s financial life, but also helps to build the world you want for your children and grandchildren.
Anthony M. Conte is managing partner at Conte Wealth Advisors based in Camp Hill. He can be reached at [email protected] Registered Representative Securities offered through Cambridge Investment Research Inc., a broker/dealer, member FINRA/SIPC. Investment Advisor Representative Cambridge Investment Research Advisors Inc., a Registered Investment Advisor. Cambridge and Conte Wealth Advisors LLC are not affiliated.