Values-Aligned Investing: How and Where to Invest Your Money

Many investors today demonstrate deep care about where their money goes and how it's deployed. This thoughtful approach makes for strong investment decisions. However, because we care so much, we also feel the inherent need to understand in depth. We want to be thorough and thoughtful about our decisions, weighing impact and consequence, which may lead to overwhelm, analysis paralysis, or lack of confidence.

In turn, this can lead to inaction and the path of least resistance, which often looks like stashing cash or defaulting to what 'the experts' recommend. I'm here to tell you that it doesn't have to be that way! We can lean on quantitative data, networks of like-minded investors, and our intuition to make investment decisions that feel good and aligned rather than burdensome or heavy.

Today, I want to explore values-aligned investing in depth. I'll examine why "responsible investing" isn't necessarily what it appears to be, as well as alternative ways to align your values and investing and inspire you to take action.

Note: The examples discussed below are non-exhaustive; I wanted to provide you with some options that I've found on my wealth-building journey. I can assure you that when you start to connect to your values, whatever those may be, a world of incredible investment opportunities, companies, and people will appear.

The Definition of (and Disillusionment with) Responsible Investing

When we think of values-aligned investing, we may recognize a category of investments that has come to the forefront in recent years. Responsible investing (also known as impact and ESG investing) is an investment product intended to generate positive governance, social and environmental change alongside a financial return.

Once considered somewhat radical, responsible investing has rapidly grown in popularity. Global sustainable investment assets reached $35.3 trillion in 2020, representing a 15% increase from 2018. Sustainability has been good for Wall Street's bottom line.

According to recent Morgan Stanley research, 85% of respondents want to invest in companies or funds that aim to achieve market-rate returns AND a positive social or environmental impact. That percentage increases as investors' age decreases, with 95% of Millennials and Gen Z holding this same sentiment.

However, we all know Wall Street is a wizard with marketing, investor psychology, and consumer behavior, so it didn't take them long to capitalize on this trend. Passive ESG index funds are the easy, convenient way to appease the growing demand for responsible and impact investments, but if you dig a little deeper, you will find that many funds have slapped a nebulous ESG label on a basket of stocks that are not much different than non-ESG funds. Disappointing.

Fortunately, ESG funds are just one small part of what I consider to be values-aligned investing. It's one thing to allocate funds to a passive ESG index fund through your 401k. It's quite another to uncover your deepest values and take an active investment approach to grow your wealth and achieve your personal, family, and community goals.

Investing: The Highest Level of Charity

Our caring, charitable nature calls us to use our dollars for good, and more than ever, we have the power to align our values to our investments in a meaningful way. When we think of making a difference in the world or within ourselves, investing may not be the first thing that comes to mind. But I'm going to (perhaps boldly) state that it should be.

What if I told you that investing is the highest form of charity? I'm not the first person to realize this. Moses Maimonides was a Jewish rabbi, scholar, philosopher, and physician who conceptualized a hierarchical system of charitable giving. He said:

"The greatest level, above which there is no greater, is to support [another] by endowing him with a gift or loan, or entering into a partnership with him, or finding employment for him, in order to strengthen his hand so that he will not need to be dependent upon others . . ."

- Maimonides' Eight Levels of Tzedakah

To paraphrase, the highest level is to give another the means to be productive and constructive, to give them the autonomy to produce dignified work. And, according to Ray Dalio, real wealth is created through productive means, and investment is a good leading indicator of prosperity.

By activating your capital to invest in your values, whether that's via a product, company, community, or your own ventures, it's in service to the greater good. So, imagine that the greater good is supported by more investment capital from more people: my capital, your capital, our capital. It can go directly into the hands of those with boots on the ground, and often, those who are most overlooked.

This includes women, people of color, minority groups, and many others who are disenfranchised, not part of 'the system', working on fringe ideas and technologies, and not on the radar of most investment managers.

For example, Lendonate connects nonprofits in need of business loans to investors seeking yield. Portfolia and How Women Invest are among a rising number of diverse venture capital firms investing in women, minority-led startups, and sustainability.

Charitable and nonprofit organizations are plentiful, and donating to these organizations has long been the way we're told our money can make a difference. And, it does. There will always be a place in our budgets for tithing and giving. However, the line between philanthropy and investing has become somewhat blurred. Investing is truly a form of charity, an empowering one at that! In fact, it's better.

Why? Because you are outwardly expressing your values and supporting others while aligning them to your wealth. And the more wealth we build for ourselves, our families, and our communities, the more impact we can make. Whereas donating is a linear transaction, investing with intention is a virtuous circle.

Opportunities for Values-aligned Investing Abound

The internet has opened our eyes to, awareness about, and opportunities for investing our money according to our values. It has connected donors to causes and investors to investments in ways that would have previously been impossible.

The rise of crowdfunding, which started in 2009 with Kickstarter and Indiegogo, gave us the ability to direct money in exchange for something beyond philanthropy, something tangible. Maybe the ROI was a t-shirt, but it forever changed how we support causes, and eventually, small businesses, entrepreneurs, and creatives through crowd-sourced startup funding. This move finally leveled the playing field with venture capital firms, a funding avenue that's notoriously hard for underrepresented founders to break into. And since 2016, crowdfunding has given retail, non-accredited investors access to invest in alternative assets such as startups and real estate.

Crowdfunding & Venture Capital Facts

• In 2023, women-founded companies received just 2.1% of venture capital funding (and an even smaller fraction went to women of color), despite research showing that diverse teams provide better returns on investments.

• An estimated $17.2 billion is generated every year through crowdfunding in North America.

• In 2012, the JOBS Act allowed startups to raise up to $1 million from investors via crowdfunding. This was different than crowdfunding websites such as Kickstarter, where people do not receive equity for their contributions.

• The global real estate crowdfunding market reached $11.5 billion in 2023, with North America representing 40 percent of these investments.

When you make an equity investment into a new startup that fits your values, say in those trying to solve the problem of plastic pollution, developing technologies that save our oceans, building affordable housing real estate, or in a minority-led business, you can make an impact that upholds your beliefs AND generates financial returns.

Here are some personal examples. I value freedom and innovation, especially when it creates more opportunities and abundance for everyone. So, I am naturally drawn to and direct some of my investments into women-led and minority-focused businesses, founders with huge hearts and companies to match, or alternative products that have changed my life. I also play and invest in the extraordinarily innovative and fast-paced blockchain, crypto, and Web3 spaces, where decentralization, autonomy, community and WAGMI (we're all gonna make it) are prevalent themes and actual modes of operating.

It's Worth It

Remember, the first step of values-aligned investing is to spend time uncovering what those values are (WHY you want to build generational wealth for yourself, your family, your community). Only then should you focus on the how, what, and when.

While investing doesn't have to be about the highest possible returns, we must never forget that we want our money to work for us; to support us. Money deployed according to our personal values can change everything from the smallest part of our day to the direction of an entire industry (or even the creation of a new one).

If we want to invest right, we have to do our due diligence. Not only are we tasked with finding, vetting, and trusting the companies we want to invest in, we must do the same with the fund managers who are directing trillions of dollars of capital. And this brings us to a crossroads. While there's no shortage of investment opportunities that align with our ethical beliefs, how many of us have the TIME to do this kind of research?

Our time is so little and so precious as it is, but finding companies and causes that you can get behind with your investment dollars is worth it. And, when you understand and step into your values, your efforts can be specific and intentional. In other words, you may want to learn about innovative companies on WeFunder or support minority women founders with How Women Invest as opposed to pouring over the latest Wall St. ESG manager report! I know I do.

Just imagine what we could accomplish by bringing excitement, energy, and enthusiasm to investing?! Investing can be all of this and so much more. I encourage you to follow the threads and nudges of your innermost voice and values.

Tell me what you're interested in, and I can tell you where you can go make a difference as an investor alongside a growing cohort of people who are showing up for the things they hold dear. I'm here for it, and I'd love for you to join me.