Vision Investing: Strategies to reflect your values

Image shows two people facing away from the camera and dressed in jackets and pants; they stand on a rocky cliff overlooking on the beach with a sunset on the horizon.

Do you want your investments to better reflect the things you care about? It’s easier now than ever.

Dan Wanstreet, ESG
Dan Wanstreet,
Director of Environmental, Social, and Governance (ESG) Strategy,
Social Impact Investing Team, Wells Fargo Investment Institute

As year-end approaches, we often reflect on decisions made and how well our plans have aligned with our objectives. We also look forward to the positive impact our efforts can have in the years ahead. That is why year-end planning for most families includes a review of how they use their resources not just toward personal wealth growth but also influencing the world around them.

Over the past six years, I have watched values-based investing topics — for example, ESG (environmental, social, and governance) and SRI (socially responsible investing) — gain prominence in financial media. Stories about sustainability, shareholder activism, corporate governance, and sustainable investing now appear on the front page of publications like The Wall Street Journal instead of being buried in the back.

Fueled by their attention and demand, investors have gone from having relatively few choices in this space to navigating an alphabet soup of types of investments and acronyms, including ESG, SRI, and impact investing. So how do you choose the best approach for you?

Whose values are we talking about?

To answer this question, let’s explore what’s driving the growth in this type of investing. The pandemic and the introspection related to it are part of the ongoing change, but societal trends are also pushing for more accountability and individual responsibility around equity, equality, and environmental issues. Bottom line, individuals have become more intentional with the things they care about. And this has carried over to their expectations for the businesses they support, as well as for how they invest.

Because these choices are so personal, there is no one strategy that is suitable for all investors wishing to be more intentional about where they spend and invest their money. Some individuals may want to focus on companies that reflect their religious beliefs. Others may feel passionately about avoiding companies that damage the environment. Some may seek out companies that give back to their communities.

To reflect the personal nature of your values and choices, we prefer to use the more comprehensive term Vision Investing. How does that help? Because while terminology like ESG, responsible investing, sustainable investing, and impact investing all refer to some degree of values alignment, none offers the complete picture. The term Vision Investing encompasses the broader process of tailoring your investments to your specific beliefs by helping you define what matters to you and selecting investments that align with those beliefs while avoiding those businesses that don’t.

Based on its current trajectory, Vision Investing is going to get easier to implement and its impacts easier to measure.

Am I giving up returns to support my beliefs?

Many investors think that if you start integrating nonfinancial, personal values into your investment choices, you have to sacrifice returns. But in my opinion, the preponderance of evidence says that that’s not the case — there really is no trade-off.

On top of that, the premise of Vision Investing is not pure idealism (another common misconception). Instead, it includes analyzing companies through the lens of corporate governance issues and other factors that can, and do, impact performance and may impact returns. With expectations being raised for corporate behavior, companies that aren’t evolving or being transparent with their behaviors may put their companies at significant financial risk.

What comes next?

Over the past decade, global demand for responsible investing has expanded rapidly. This has resulted in the development of new techniques and more widespread consideration of environmental, social, and governance factors in the investment process. Based on its current trajectory, Vision Investing is going to get easier to implement and its impacts easier to measure, offering you a greater range of investment choices to meet your personal needs.

Wells Fargo Investment Institute, Inc. is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.

An investment’s social policy could cause it to forgo opportunities to gain exposure to certain industries, companies, sectors, or regions of the economy, which could cause it to underperform similar investments that do not operate under a social policy. Risks associated with investing in ESG-related strategies can also include a lack of consistency in approach and a lack of transparency in manager methodologies. A socially responsible investing style may shift in and out of favor.