How can you sync your plan to make sure it reflects what you feel most passionate about?
Head of Advice Center Services
Wells Fargo Wealth & Investment Management
In my experience, high-net-worth investors often ask themselves this question: “How can I best use my resources to produce the outcomes I desire?” This is no small question, as their goals often extend beyond personal wealth growth to influencing and impacting the world around them.
Historically, achieving both portfolio growth and social impact typically meant employing two distinct approaches to investing: one for investments and another for philanthropic pursuits. Fortunately, with the growth of the social enterprise sector and developments within the financial services industry, families now can integrate their investment goals with their personal values, vision, and philanthropic mission into what we call Vision Investing, potentially allowing them to strive for social impact as well as financial return.
How may this change how you approach investing today?
Unlike traditional investing, Vision Investing begins within the context of a societal or values-based objective. The goal is a bigger-picture, more active approach that combines traditional investing with the values reflected in philanthropy. While financial benefits are important, your first step is to identify your personal values and to clarify the purpose you want to achieve.
The goal is a bigger-picture, more active approach that syncs traditional investing with the values reflected in philanthropy.
This approach also may change who is at the table for family conversations around investing. Because many families desire to pass on their values as well as their assets to the younger generations, families of wealth should consider including succeeding generations in the discussions about Vision Investing. In our view, including multiple generations in the value discussion can help strengthen your financial and philanthropic legacy.
This discussion may not be a quick one, as your family members may care about many different issues, and you will want to consider what role legacy and heirs will play in the process. Issues that may be important to investors could relate to environmental issues like reducing pollution and protecting the environment. As society continues to evolve, newer issues have emerged to compete with or complement past concerns. Issues such as social justice or corporate governance are becoming more prevalent alongside traditional concerns such as hunger, education, and health care. There is much to discuss as you seek to align your values across generations.
What are some ways to approach a values-based investment strategy?
With a clear view of your family’s values, mission, and objectives, you can begin to explore the spectrum of opportunities available to connect your money with meaning.
On one end, you can invest in social impact strategies that seek to align with your vision and values by including non-financial factors in your investment analysis. This is often referred to as socially responsible or ESG (environmental, social, and governance) investing. On the philanthropic end of the spectrum, you can engage in traditional giving and apply blended strategies such as program-related investments and mission-related investments. These investment options and strategies are not limited to just the philanthropic accounts; they may be available across all investment portfolios.
How do you get started?
The most important next step in my view is to find an investment professional who can meet you where you currently are in the process and help you navigate the journey. As Vision Investing continues to evolve, terminology can be confusing and definitions may change, making it challenging for some people to feel fully confident in their options and strategies. Look for someone who can help you clarify your values and desired impact and then explore strategies and opportunities that align with your vision. The journey awaits.
Wells Fargo Wealth & Investment Management (WIM) is a division within Wells Fargo & Company. WIM provides financial products and services through various bank and brokerage affiliates of Wells Fargo & Company.
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.
“Sustainable” or “Social Impact” investing focuses on companies that demonstrate adherence to environmental, social, and corporate governance (ESG) principles, among other values. There is no assurance that social impact investing can be an effective strategy under all market conditions or that a strategy’s holdings will exhibit positive or favorable ESG characteristics. Different investment styles tend to shift in and out of favor. In addition, 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 portfolios that do not have 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. In addition, some ESG investments may be dependent on government tax incentives and subsidies and on political support for certain environmental technologies and companies. The ESG sector also may have challenges such as a limited number of issuers and liquidity in the market, including a robust secondary market. There are many factors to consider when choosing an investment portfolio, and ESG data is only one component to potentially consider. Investors should not place undue reliance on ESG principles when selecting an investment.
