Investing for a Better Future

Investing at its most basic is a tangible act of hope that the future will be good. The difficulty in seeing it that way, of course, lies in the different, personal definitions we all have of what “future” and “good” mean.

For some, “future” and “good” mean only having enough money for their lifetime and possibly the lifetimes of their children. That’s understandable - in our culture of scarcity the first thing we’re trained to do when we’re scared (and who wouldn’t be scared right now?) is to huddle with people like ourselves around the resources we worked tremendously hard to gather. Investing for these people sometimes feels like an act of desperation, not of hope.

For you, the meanings of “future” and “good” might cast a wider net: good for entire communities, good for the earth and all its inhabitants, good for future generations. With such broad definitions, you might even have a broader understanding of investing, which could mean the creation of wealth that’s not limited to dollars, but encompasses the wealth of participating in a healthy community with thriving ecosystems and sustainable relationships. To invest this way, and to keep investing this way even when it feels like things are only getting worse, requires that you are deeply connected to your WHY.

Easy, Bad Answers and Harder, Less Bad Answers

More than any other tool in the financial planning kit, investing is the home of easy, one-size-fits-all answers, and it’s not necessarily because there’s a whole industry designed to lull you into buying their products by making them seem perfect for everyone (even though there is).

In part, investing is home to easy answers because the hard answers are...hard.

Your values are personal. They’re complex, and they’re unique. And so are the companies and causes you want to invest in. Matching your values fingerprint with someone else’s is hard work, especially if you haven’t actually examined your own fingerprint that closely.

Off-the-rack solutions, like relying on ETFs and mutual funds with ESG ( environmental, social, and governance criteria screens) branding aren’t all horrible. But just ask my friend and colleague Darryl Brown, CFA, about what you might find when you look closely at the companies you end up owning. He’s got plenty of examples of people wanting to invest in companies that advance social justice, diverse representation, and fair employment standards and finding out they now own Amazon, Google, and Tesla instead.

Bespoke solutions, just like suits, are more expensive, but are typically worth the cost. Working with a professional to articulate what you want (and don’t want) and tailor a portfolio around your unique values is a good way to avoid the easy, bad answers. It’s hard, because you still have to rely on someone else’s understanding of your values, and imperfect, because you will be relying on proxy characteristics (like board representation, or the CEO’s personality) to screen for a good match...and it won’t always work.

This leads to another hard truth: investing with more than just the growth of your own personal net worth in mind is harder to measure, and not because values-based investing generates lower returns (it doesn’t). Rather, it’s because a definition of success that includes the health of the entire planet, for example, requires more than the simple math of financial statements to measure. Not only do you have to examine and articulate your personal values, you have to design your own personal scorecard.

Trying to build a good future using only traditional investing tools is like trying to buy a tomato in The Good Place: there is simultaneously too much and too little information to make a perfect decision about the impact your dollars will have, and no tangible evidence that all that hard work to make the best decision had the impact you wanted anyway. But it’s worth doing anyway.

Hard Answers, and How to Live With Them

Yes, investing your time, labour, and money in creating a good future is hard work, just like most worthwhile pursuits. The sheer amount of work might feel daunting, so here’s how to get from wanting to invest according to your values to actually doing it:

Start With Why

As my friend Bonnie Foley-Wong writes in her book Integrated Investing:

The first thing people ask me when they are thinking about investing is, “What should I invest in?” But the first question they should be asking is, “Why am I investing?”

Articulate the kind of future you want. Discuss it with your family and the people you work with in your community, and be as specific as possible about what you mean by “good”, and what you mean by “future”. Describe the change you want to see in the world: is it a problem you’re participating in? Is it a solution you’re not participating in? (You may find that the Design Thinking framework is a helpful tool to use for this.)

And here’s a potential bonus: involving future generations in your investing decisions and teaching them how to carry on after you may also line up neatly with your values around education and family!

Practice Explaining Yourself

Imagine you’re explaining your values to someone who doesn’t know you from Adam but who will be responsible for executing your vision. You might know what you mean by “I’m against consumerism” but they probably don’t - so tell them: what companies or attitudes do you want to withhold your resources from? What endeavours would you feel comfortable supporting?

If you think a particular CEO is power-hungry and represents everything wrong with the world, would trying to band together with other shareholders to force them out be a good use of your resources? Or would avoiding them and everything they touch be a better use of your time? Be as clear as possible: what is the outcome you want to achieve, and how will you measure it?

Perfect is the Enemy of Good

No matter how bad it seems like things are getting, remember that nothing is inevitable (no, not even Thanos). The top five companies in the seventies are not the top five companies now. Corporate decision-makers who don’t believe a word of their own greenwashing campaigns are scared of the reputational fall-out from not at least appearing to care.

The old paradigms of “investing is only about money” and “corporations only exist to maximize shareholder values” are actually shifting. Not fast, mind you, and it will take hard, sustained work to create long-term, meaningful change...but part of that change is the belief that it can be done. People like you, who engage with their wealth of resources as a source of future good can make it happen, and the first step is simply believing it can be done and acting accordingly.