Good questions we can ask ourselves, according to Ontario financial advisor Colin Kirby
What do you do when you get mail about your financial investments? Many of us might tear open the envelope to see whether our investments have made money or lost money this reporting period. Often everything else in the page can seem like gibberish – and that’s okay as long as our accounts are moving in the right direction, right?
This has become the reality in today’s society. The financial industry has made investing all about the rate of return when there is so much more to know and understand.
Proverbs 2:6 ESV - For the Lord gives wisdom;
from his mouth come knowledge and understanding.
There is more to consider when deciding what to invest in. We have choices, but before we look at all the options, we must first understand: what is it exactly that we are investing in?
As a Child of God, I recognize that everything I have is His and I am simply a steward of the gifts and resources He has entrusted to me. It is my responsibility to be wise, strategic and resourceful with these gifts.
Deuteronomy 10:14 ESV - Behold, to the Lord your God belong heaven
and the heaven of heavens, the earth with all that is in it.
Scripture repeatedly reminds us that God is owner of all, and so we should also be thinking this way about our financial assets. As stewards of His resources, we should be responsible with our savings in ways that respect and honour God, and advance our faith and his kingdom. But how? This is where education comes in and the importance of asking the right questions.
When you meet with a financial advisor about investing, they are required to ask questions that focus on your risk tolerance and time horizon to help determine the kind of investments you should have within your portfolio. These questions are a very important part of the process – however, I believe many of them are missing another very important question.
The key question
It goes something like this: “Is there anything you might want to avoid when investing that might go against your values or beliefs?”
Why should this question matter? What does this have to do with my investments? We are specifically talking about mutual funds (or segregated funds). These funds are made up of stocks and/or bonds of numerous companies. When you purchase a fund, you indirectly become an owner of the companies that are held within that fund.
So, is there anything you would prefer not to invest in, and ultimately profit from, because it goes against your values or beliefs?
In the investing world, this kind of question is tackled in a couple of ways. Let me explain three key terms.
Negative screening has a long history of being applied by socially responsible investors such as charities, religious organizations and endowments. This approach excludes entire sectors or industries from the investable universe depending on the asset owner’s requirements. For example, faith-based investors are more likely to avoid industries such as tobacco, alcohol, gambling, thermal coal, nuclear, abortion/contraceptive, animal testing, guns and ammunition, and adult entertainment.
Positive screening usually begins with identifying an issue where investors want to have a positive impact. Obviously that impact needs to be measured, and so it’s important to agree on how to measure. For example, an investor who is concerned about climate change might screen for companies with the lowest carbon footprint (or carbon risk) in each sector.
ESG investing is a strategy which digs even deeper into environmental, social and governance risks and opportunities. ESG investing is like adding an extra layer of analysis compared with traditional investing analysis. That can mean examining employee-employer relations, corporate social responsibility framework, environmental practices and respect for human rights.
Some of these terms are newer but many of the concepts have been around for generations. Back in 1928 Phillip Carret launched one of the first mutual fund companies still successful today – Fidelity Mutual Trust. This company was initially designed to serve church investors, rejecting alcohol and tobacco companies in its portfolios. This company used negative screening when designing some of its original funds.
Questions to ask yourself
Here are some questions that you might ask yourself when it comes to your investments:
- Am I using His money to build His kingdom or my own?
- Do I trust Him alone to be my provider, or am I making compromises in my obedience in order to increase my net worth?
- Am I currently earning profits from companies that might not align with my values and/or beliefs and are not pleasing to God?
It is good to be reminded sometimes that whatever we do, we do it all to glorify God and that should also include our investing. We have choices. I encourage you the next time you open that statement or meet with your financial advisor, ask questions. Do my investments align with my values?
There are no perfect funds, but there are some that can help minimize your exposure to companies you may not want to invest in or earn profits from.
All you need to do is learn to ask the right questions.
Colin Kirby, Kingdom First Financial, is a financial advisor in Cambridge, Ont. Visit his website, Kingdomfirst.ca, for more information.