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Is Aligning Your Values With Your Money and Your Goals Important To You? Let’s discuss.

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written by Brian Dudley, CFP®  Founder+COO



Actions, speak louder than, speak louder than, speak louder than love songs.

-John Legend (hook from ‘Actions’ off his new album ‘Bigger Love’)

Perfect timing for this song and some musical inspiration for launching this post. This song is about actions meaning more than words inside of a relationship. Last night when I was listening to this album, I thought, “man, this applies to everything” right? Actions matter. Words without action are just that, words. Let's now incorporate my love for music into investing. Our world is transforming daily. It has been pushed further and faster as social media provides immediate feedback to global events. We can argue whether this is good or bad from a behavioral aspect, (knee jerk reactions without deeper understanding of topics or events can often cause impulsive and incorrect responses, imo) but it can help push the needle forward. 

Today, social equity issues are front page news, along with the ways corporations are being run and treating their employees. This blog post was thought up well before recent tragedies in the news. However, I  wanted to share the original LinkedIn announcement about Pinnacle’s work within the ESG space to show a timeline which you can see in the image for this post (more than three months ago). This post isn’t intended to be opportunistic, but rather offer you an opportunity to evaluate whether you want to do more than read articles, watch a few Netflix movies/shows,  or post a few memes on social media about a cause. You know, that feel good, but do little-to-no good social version of green washing (google that). I want to help you push for real change. You can take action on different causes that you believe in and support those causes in many ways. Donating your time, donating your money, and helping raise awareness with actions are examples to name a few. Being in the wealth management business, we want to show you another way that you can work to align your values, money, and goals, which is the makeup of your financial DNA. Money talks, that’s the reality. Does your $50 donation to charity make a difference? Maybe. Does a $150,000 reallocation of your old 401(k) to a portfolio focused more on your cause make more of a difference? Probably more so. 

The problem is, how can you measure it?

This blog will cover the basics of what ESG investing is, provide an option on how you can analyze your existing portfolio (measure it), and how to go about aligning your personal values with your money and goals.

What is ESG?  

Environmental, Social, and Governance factors (ESG) are a set of standards that can be used to assess a business’ environmental and social impact. ESG investing combines ESG data with traditional financial metrics to reflect the issues that investors care about and achieve investment goals. 

Environmental factors examine a company’s role as a steward of the environment. It covers such issues as carbon emissions, waste management, and the use of green or clean tech. 

Social factors have to do with a company’s business relationships. These include employees, customers, supplies, and the communities where they operate. If you believe that you want to push for social equality with your money, your social score is what you will want to improve.

Governance factors look  at ethical business conduct and executive behavior. The structure of the board, executive pay, the rights of shareholders, anti-bribery practices and anti-corruption practices are all under this category. If you believe boards should be diverse or inclusive, this is the category you will want to improve. 

How do you measure your values?

The first step in helping you align your values with your money and goals is to define those values. Which ESG factors are important to you and which aren’t as much? Sure, I think most of us want the world to be a better place, but maybe we have more of an issue with one topic than another. Personally, after completing my own discovery quiz, my focus was on social equality. Specifically, I want to make sure women are paid the same as men. Why is that important to me? I never really understood why people in the same or similar position received different compensation. If a person is good at their job, they should be paid on merit not on race or gender. Additionally, I see how hard my wife works and expect that when my daughter finds her career, she is on a level playing field with all (she will f*cking crush her peers- I believe that). I also believe that those who haven’t had the same opportunities to succeed are offered ways to move up to the same levels as their colleagues who have grown up with those opportunities. None of these should take the place of hard work, of course. Outwork the room, perform, and your race or sex shouldn’t matter. Ever. 

Over the past year, I have been working with Fidelity LABS, which is the innovation team at Fidelity, on a way to help define values (they do the work, I review and provide feedback). We are one of five investment advisory firms in the country to be a part of this pilot program. I'm going to say it a little louder for those who can't hear it in the back. One of five firms in the country to be working with the Fidelity LABS team. The LABS team has created a values discovery quiz which asks questions to see what ESG topics mean the most to you. It also helps you define issues that you may want to focus on to help change or move the cause forward. It provides a guideline for the next conversation.

If you’d like to take the values discovery quiz, email me and I’ll respond with a personal link to the quiz. Take it, ask me for analysis, or take it to your own advisor. I won't charge you to go through this process, either. If you end up wanting us to implement changes and manage your plan, we'll discuss cost. Until then, use me as a resource to help you. 

Here’ a snapshot of my results:


So, how do you align your existing investments with your values?

This sounds complicated to measure, right? No. It’s actually becoming easier with technology and programs like the one Fidelity Labs is building. After you have defined your values and what topic(s) you want to focus on, we can then look at your existing holdings. A statement showing holdings that you want to analyze can be sent over. Not long after (and soon to be immediate), you will receive a report that highlights your answers and compares them to models built by us with different tilts provided by Fidelity Institutional's ESG research analysis. Even if you aren't interested in our models and tilts, the analysis will provide you with details on your current portfolio. Check this out:

In this case, we were able to move John’s portfolio from the 1st-25th (lowest) percentile to the top percentile, by using a leaders or best-in-class approach. There are other tilts we have built, too, and more are coming. ESG Leaders is built, Fossil Fuel Free is built, and coming soon (and can be built quicker per request) are tilts for Gender Diversity (advancing gender parity), People and Planet (social inequality and climate), and an Ethical Exclusions tilt (excludes tobacco, alcohol, and civilian firearms). 

Final thoughts.

Now, does this mean you should invest this way with all of your money? That’s personal to you. I have a client who has recently moved all of her funds into a portfolio that is fossil fuel free. Done. I have another who wanted to use a portion of his funds to focus on just having a better overall ESG score without affecting his portfolio risk/return characteristics in a major way. Done. It really is up to you. If you believe that your life and time spent outside of investing is a way of aligning your values with who you are, that’s also fine. This isn’t a judgement in character if you don't manage your portfolio using ESG factors, this is just providing you an opportunity to do more with your investments. A don’t talk about it, be about it moment, if you will. 

Items to consider

  • You love your current advisor. You would love to bring your results or just have the conversation with them. You have mentioned the desire to talk about ESG (maybe not defined specifically) here in the past, but your advisor has always said, “oh, those do good investments don’t make any money.” He or she may have been right ten years ago. They may also think you are talking about green/socially responsible investing portfolios built only to eliminate certain industries (oil, for example). ESG is different. It is a positive screening tool for companies who are pushing issues forward, not just eliminating certain industries altogether. In other words, the game has changed homie (you can quote me here). Ask your advisor to check into it again or ask an advisor who will show you a strategy that fits your values AND goals. Oh, and just for some context, some of the top ESG rated companies according to MSCI last year are Microsoft, Home Depot, Google, & Vertex Pharmaceuticals (you’ve seen Vertex's Seaport location in Boston, I am sure). I can’t provide past performance here or guarantee that they will perform the same moving forward. But look up their track records and remember those names when your advisor tells you it’s not worth your time. 

  • Taxes are important when making changes. If you are looking to make adjustments to your retirement accounts, you can go all in without taxable implications. In a taxable account, such as an individual, joint, or trust, be careful. Although you may want to align your values with your money and goals,  without reviewing the taxable implications, you may cause capital gains (short or long) by moving things around. It may still make sense, but just be aware here.

  • If you want to read more about ESG, but don’t know where to start because there is a lot of information out there from money managers that pay to have their research or name first, hit me up. At Pinnacle, we have information available to us with content from multiple ESG providers and research firms. 


As always, thank you for your time.

Brian