In a world where financial success often seems at odds with our faith and values, there’s a growing movement that challenges this notion and illuminates an alternative pathway to success. It's a space where the head (logical, rational investment decisions) meets the heart (concern about the impact on others) in the realm of investing.

Investing in a way that doesn’t just grow the numbers, but enriches lives and upholds values is easier said than done. But how we grow our wealth matters. In fact, how we get there needs to part of the definition of success if we wish to represent Jesus as his ambassadors.

The Transformative Power of Your Investments

As Christian stewards who manage God’s resources on his behalf, our definition of success must increasingly align with his as we get to know him better through our discipleship journey. Our investment choices, too, can increasingly align with his values, just like every other area of our lives.

As we intentionally invest with both head and heart, we can demonstrate to the world God’s nature and his ways, actively pulling down the culture of heaven into the earth.

Aligning our portfolio with our personal values not only allows us to make progress on our own personal financial goals. It also contributes to the positive transformation we hope to see in the world, thus usurping previous assumptions about the nature and purpose of investing.

The journey into values-aligned and impact investing begins with a simple yet profound realization: our investments have the power to shape the future. We get to vote with our dollars for the future we want for our children. It's not just about where your money is growing but also about where it's going and the kind of future it's helping to create. This realization requires a significant upgrade from the insufficient and incomplete traditional approach to investment analysis, which looks only at metrics of risk and return. Our investing can and does produce much more than risk-adjusted returns.

The Avoid-Embrace-Engage-Impact Framework

Another helpful step in this journey is understanding the framework of avoid, embrace, and engage. This concept guides investors to avoid companies and funds that operate contrary to kingdom values, embrace those that align with their values, and explore ways to actively engage with companies to advocate for positive change. The act of choosing where to place your investments becomes a reflection of your personal convictions, transforming your portfolio into a powerful tool for change.

The "Avoid, Embrace, Engage and Impact" framework isn't just an investment strategy; it's a manifesto for meaningful wealth management. It allows us to wield our financial power with intention and impact. Here's how it transforms your portfolio:

Avoid: This is our line in the sand. By steering clear of investments in industries that clash with our values (think tobacco, gambling, or perhaps fossil fuels), we're not just opting out; we're taking a stand. It's a declaration that our dollars won't endorse the production of products or services that are harmful to humanity. This is about making sure our investments don't betray our principles.

Embrace: Here, we pivot towards positivity. It's about actively seeking out companies that are creating valuable products or services that benefit humanity. Renewable energy, healthcare innovations, ethical consumer goods—these are investments that align our portfolio with our vision for a better world. It's a proactive choice to back solutions, not problems, ensuring our money is a force for good.

Engage: This step shifts us from being passive investors into active advocates. It's where we use our voice and our vote as shareholders to encourage positive corporate behavior. Whether it's championing sustainability, advocating for fair labor practices within the supply chain, or demanding corporate transparency, engagement is our tool for encouraging better business practices. It's about not just owning shares, but taking ownership of what those shares stand for. (And if you, like most investors, do not have time to become knowledgeable on all the issues corporations face, you can use an asset manager who will advocate on your behalf in alignment with your values.)

Impact: This approach focuses on the intention to generate positive, measurable social, environmental, or spiritual impact alongside a financial return. While many of the non-financial outcomes of investing can be difficult to quantify, there is a growing focus on measuring impact, particularly in private markets investing, understanding that whatever is measured will likely improve over time. We achieve that which we focus on.

Adopting the "Avoid, Embrace, Engage, and Impact" framework transforms investing from a mere financial transaction to a powerful expression of your deepest values. It's about making every dollar count for more than just profit—making it count for the kingdom, for purpose, for people, and for the stewardship of the planet. This isn't just investing; it's investing with head and heart fully aligned.

Debunking The Myth of Lower Returns

It's time to dismantle the old myth that investing with our conscience in tact automatically means sacrificing returns. Many investors derive great joy from having a small portion of their portfolio for certain investments that prioritize impact over return (Deep Impact, Concessional, or even Charitable investments). We’ve even heard some investors describe those lower-performing investments as their favorites because of the meaningful, positive impact they can have on the world. But those who need to prioritize returns don’t need to forgo values alignment.

Let's get real - ethical investments are often seen as the 'nice-to-have' rather than the 'must-have' in a portfolio. But here's the snappy truth: investing with a conscience is not just a moral choice; it's a strategic one. The 2019 study by the Biblically Responsible Investing Institute shines a spotlight on this, showing that over a 20-year period, portfolios screened for ethical considerations (the negative industries removed) performed neck and neck with the S&P 500.

When we go a step further, not only taking out the negative companies, but also layering on filtering for companies with positive cultures and values-driven leaders, or companies who produce value-creating goods and services, we can experience a natural tailwind.

Why? Because companies that serve their employees and customers well are tapping into powerful potential sources of outperformance. They're the ones innovating, gaining customer loyalty, and staying ahead of regulatory curves. They're not just avoiding risks; they're creating new opportunities. In a world increasingly conscious of its footprint and mindful of ethical issues in supply chains, these companies are setting the pace, and they're doing it with long-term profitability in mind.

So, where do head and heart converge in this scenario? They meet at the junction of rigorous financial analysis and a broader vision for “on earth as it is in heaven.” It's about using the sharp disciplines of multi-asset investing, risk management, and due diligence to unearth investments that can potentially provide not just healthy returns but a healthier world.

This approach allows us as investors to bring our whole selves to the decision-making process, including our conscience, considering the ripple effects of our investment dollars. It's an invitation to be part of a movement that aligns personal financial success with global betterment.

In essence, Faith-Driven Investing is about looking at the bigger story God is writing and recognizing that profitability and positivity are not mutually exclusive in his economy. It's a clarion call to investors everywhere: your money has power. Use it to fuel not just your future, but the future world you want your grandchildren to inherit. This isn't just investing; it's investing with purpose, with vision, and it requires your head and heart to be fully engaged.

The question isn't why should you consider values-aligned investments; it's why wouldn't you?

The integration of head and heart in the investment process is not just a lofty ideal but a practical strategy for those looking to make their money work for them and without neglecting who they are as people. The avoid, embrace, and engage framework provides a solid foundation for making informed, values-aligned investment choices, while the rapidly growing line up of faith-driven funds and increasing inflows into them underscores the potential demand for ethical investments. This growing demand implies that investors believe this approach can deliver the necessary financial outcomes.

We stand at the crossroads of a new era in investing. It's clear that the flow of investment dollars is the lifeblood that supports the growth and proliferation of businesses. The question is which sort of businesses do you want to see increase in scale and influence? The future will be shaped by those who recognize the power of their portfolio to effect positive change.

Every investment has an impact. What’s yours? Your investments can and do change the world, to some degree. What kind of change will you choose to support? The choice is yours.

Published on April 04 2024