In today’s climate of environmental, human and health crises, investors are interested in purpose-driven investments that align with trends, shareholder returns and employee desires. This new expectation is shifting the way organizations transact with both internal and external stakeholders.
To succeed as an investment professional, you must take a holistic view of your investment strategy. Maximizing shareholder returns is no longer the sole measure of success. You — like the CEOs in your portfolios — have to answer to the impact your investments have on all stakeholders. This includes the entire supply chain: all levels of employees, suppliers and vendors, customers and the community members surrounding your business more broadly. Clients and employees want their investments to make life better for people and the planet. You as an investment professional need to be aware of and intentional about the societal, environmental, cultural and human impacts of your investments.
In the next 25 years, over $68 trillion will be passed from boomers to younger generations. This generational wealth transfer thrusts the millennial generation’s purpose-driven approach into the mainstream of investment management. Where previous generations trusted advisors, with a “set-it-and-forget-it” mentality, younger generations are more active, clamoring for more digital communication and values-aligned investment strategies.
It’s important to note that these new investors aren’t just your clients. They are also your employees. Attracting the best investment professionals means building, strengthening and publicizing your firm’s values-based culture. It’s time to work the way that most of us would naturally prefer to: in a way that we can be proud of — not just for our financial performance, but for the impact we are having on our children’s future.
Aligning Your Investment Considerations
Regardless of how far along the journey you are, as a trusted fiduciary you can develop a more values-aligned approach by reviewing your investments in three dimensions: Me, We and the World. This framework is intentionally simple so that it can become a shared language for your team and clients. Start by discussing questions like these with your clients:
Me:
- What do you want your portfolio to do for you financially? From an impact perspective? And in terms of the legacy you want to create?
- How do you want your investments to affect the individuals they touch, including the investor, the customer, the employee and so on?
- How do portfolio companies create value for individuals, whether customers, employees or investors?
- What has to be true for you to be proud of your investments we’re making?
We:
- How do your investments serve your family? Community? Your company (if you own or run one)?
- How can our relationship be improved to better meet your goals and match your values?
- What kind of community, or society, do you want to be part of? How do you see your investments realizing that vision?
World:
- What impact would you be proud to talk about in terms of the social and environmental outcomes (or harm reduction) in your portfolio?
- How do you understand and/or track the environmental and social impact of your investments (without overburdening their and/or your teams)? How could we make that understanding and tracking more satisfying for you?
- How do you understand your own purpose, and how your investments advance it? Do you know our firm’s purpose and desired impact on the world?
Aligning with your employees
Just as your clients are pressing you for this more holistic approach to their portfolios, your employees (current and future) want to use the same approach in their careers. Firms that invest in their employees across these three dimensions create a meaningful place to work and will win the war on talent.
Me:
- Are our employees able to reach their full individual potential through their work here?
- Are we understanding what employees need to thrive physically, intellectually, mentally, spiritually and financially, and then investing to support those needs?
- What policies, procedures or informal behaviors could we change to make employees feel more supported and well?
We:
- Are we building trusting, collaborative, inclusive and innovative teams that can navigate the fast-paced change of the investment industry for years to come?
- Are we investing in the growth of our teams? How are we encouraging skill-building, including technical, transferable and cultural skills?
World:
- What impact would you be proud to talk about in terms of the social and environmental outcomes (or harm reduction) in your work?
- How do you understand and/or track the environmental and social impact of your work (without overburdening your team)? How could we make that understanding and tracking more satisfying for you?
- How do you understand your own purpose, and how your work here advances it? Do you know our firm’s purpose and desired impact on the world?
5 steps for purpose-driven change
The work of purposeful leadership is an ongoing process in which perfect is the enemy of good.The important thing is to start somewhere. Given our changing economic, demographic and political context, you need to adapt to the trends and changes to stay on top.
These five points and actions can move you and your company toward alignment, avoid complacency and move your organization forward.
- Awareness. You are now aware of the need to align investments and management with purpose. As you shift your investment approach, you will uncover more that you didn’t already know and continue to build awareness of those subtleties.
- Belief. You, your customers and your employees need to believe that it is possible and desirable to align your investments with their impact on the world. No matter how many statistics or case studies I share to prove the point, you must believe before we proceed. Are you, your customers and colleagues in?
- Clarity. Get clear about the values your firm shares and what your clients care about. It’s important to understand what matters, what doesn’t and what impact you’re realistically seeking in this part of your lives. This clarity is what provides the confidence to take action, as well as inspiring others to follow in your footsteps.
- Dive in. Start somewhere by doing something that aligns with what you’ve gotten clear on.
- Evolve and expand. Measure what you do with practical and specific quantitative and qualitative metrics. Keep learning and understanding where you can improve. You can start small with attainable goals, but take risks to achieve greatness.
You risk everything if you do nothing. Because the world is changing so fast, you will not keep your customers or your performance if you don’t move to ensure your investments and operations are aligned with their social and environmental impact.
Regardless of where you are on the journey today, I invite you to use the Me-We-World framework to examine where you might go further. By aligning your investment approach and your employee experience with the legacy you, your clients and your team want to leave, you will have more impact and grow your business, while also building that powerful legacy.
