It's hard to know what language to use when describing values-aligned investing to clients, especially because different people use different terms to mean the same thing. Here is some info to help.
It's hard to know what language to use when describing values-aligned investing to clients, especially because different people use different terms to mean the same thing. At YourStake, we've found that "values-aligned" is often the best umbrella term to describe this type of investing without turning people off, and serves as a starting point for you to better understand what your client is looking for.
Below are a few definitions to get started, but if you're looking for a more in-depth article focused on these topics, read here.
ESG:
When used by portfolio managers and financial professionals, ESG investing usually means incorporating financially-material environmental, social, and governance factors to improve risk-adjusted financial performance of a portfolio.
When used by a client, ESG investing generally means the client is looking to invest in a portfolio that has a positive, or at least avoids a significant negative impact on the world. While the majority of people see "ESG" as separate from political affiliation, some do associate the term "ESG" with Liberal values.
SRI:
SRI is the original term that used to encompass all of values-based investing. Now, SRI is usually associated with avoiding companies that do harm.
Impact:
This term is often used to describe all types of values-based investing, but often is associated with a deeper commitment to impact. Some impact investors are looking to invest in community institutions, or funds conducting shareholder advocacy.
Faith-Based:
You may also hear the terms "Biblically Responsible Investing", or "Shariah-Compliant Investing". Faith-based investors often get their guidance on ethical investing from faith-based institutions, such as the US Conference of Catholic Bishops (USCCB). Faith-based investors often take zero-tolerance approaches to particular industries or company practices.
Values-Aligned:
Everyone has values that are impacted by corporate activities, so this is a good catch-all term, which can allow you to start discovering exactly what your client is looking for.