How to Include Personal Values in Investment Decisions

People are social by nature. We live in families, participate in communities (local, political and spiritual) and join groups of all kinds with which we share common interests.

Driving Social Impact

As a constructive member of society, your choices and behavior may be guided by a value system. This set of core beliefs may be important to you personally and help define you as an individual. So it is also natural that you may wish to include these closely held personal values in some of the investment decisions you make.

If this concept sounds like a good idea, you are not alone. According to the United States Wealth Report 2014, published in September by Capgemini and RBC Wealth Management, more than half of the high net worth individuals surveyed described driving social impact as very or extremely important and nearly nine out of ten (88%) described it as important.^1,2

Of course, many people have favorite charities and philanthropic goals in life. Remembering them in annual tax planning and estate planning are two popular techniques investors use to make a meaningful difference in the world.

Plus, anyone who invests in municipal bonds can feel confident he or she is supporting the social good because the proceeds often go to broad civic investments, such as infrastructure (roads, bridges, sewer and water systems), schools (elementary through post high school) and health care facilities (hospitals and assisted living units).

Socially Responsible Investing Strategies

However, there are a number of other ways you can take action by allocating a portion of your portfolio to strategies often called “socially responsible investing.” Generally speaking, these strategies employ five approaches, giving you flexibility to choose investments that are right for your values—as well as your financial goals.

• Engagement — leveraging ownership rights to influence corporate boards and management.
• Negative screening — avoiding companies that do not align with your values.
• Positive screening — seeking companies that meet specific socially responsible criteria.
• Thematic investing — focusing on companies that offer innovative solutions to challenges.
• Impact investing — providing a loan to a worthy cause to fund a specific purpose.

In addition, you can choose a focus area for your socially responsible investment allocation.

• Environmental concerns — addressing issues such as clean technology, pollution, climate and broad environmental concerns.
• Environmental, Social, Governance (ESG) — addressing issues such as labor relations, human rights, executive pay and others in tandem with environmental concerns.
• Values-based (Religious) — generally using faith-based criteria to select investments.

And the good news is these strategies may do good for your portfolio in addition to doing good for society. Generally speaking, businesses that adapt their operations to socially responsible models tend to be highly competitive because the rigorous principles by which they are managed may also help them improve sustainability and reduce risk exposure.

With such a broad range of strategies available, personalization is a key feature of socially responsible investing. Should you wish to put your money to work to help drive social impact, you may want to write an investment policy statement. This is a tool that will help define your social and financial goals, and select appropriate investments accordingly.

To learn more about including your values in your investment decisions, please call your RBC Wealth Management financial advisor.

1 High net worth individuals are defined in the United States Wealth Report 2014 as those having investable assets of US$1 million or more, excluding primary residence, collectibles, consumables, and consumer durables.

2 The Capgemini, RBC Wealth Management, and Scorpio Partnership Global High Net Worth Insights Survey is the industry’s largest and most in-depth examination of high net worth individuals. The survey was conducted over January - February, 2014.

Important disclosure information about Royal Bank of Canada (RBC) and RBC Capital Markets, LLC