Talisman Talk


June 28, 2022

It’s Not Easy Being Green: Finding Your Way Through Values-based Investing

By Jennifer Kirby, Managing Partner, Senior Wealth Advisor |
“Kermit The Frog" by kevygee is marked with CC BY-SA 2.0

The good news: investors are starting to care more about the implications of their investment decisions beyond their own portfolios. The bad news: there is a ton of confusing information out there about Sustainable, Responsible, and Impact (SRI) investing.

Let’s get this out of the way: I am not having any spats about SRI investing being snake oil, or irrelevant, or whatever anti-SRI talking point exists. Here’s what a number of researchers say: there doesn’t appear to be any harm, and SRI investing might even confer financial and additional benefits.

It’s like taking vitamins. In moderation and under professional guidance, it is probably fine, or maybe it can even help you live to 100. Conversely, if you want to exit early, keep up that two pack-a-day habit and consider investing in CPAP machines. But you can still do SRI. Anybody can, but does that mean they should?

My favorite financial advisor answer applies: IT DEPENDS.



First point of confusion: terminology. There’s a giant word salad associated with SRI investing—socially responsible investing, ESG investing, environmental investing, ethical investing, green investing, mission-related investing, and so on. But all of these have the same driver at their core: investing in your values.

When you’re dealing with investing in your values it is easy to act emotionally. In my experience that causes problems such as:

  • not doing the homework to understand if you are investing in the way you intend
  • unnecessary and avoidable risk
  • negative tax consequences
  • expensive investments

There is a lot of hand-waving by my compatriots in the investing world to make this complicated. But it boils down to answering a few questions, the same ones you answer before investing in general:

  • What’s the goal for the money?
  • What’s my timeline for the goal?
  • How much risk am I comfortable with?

Then—and only then—do you ask yourself:

  • What issues are important to me?
  • Are these dealbreaker issues when I choose investments?

The answers will help you and your advisor determine if SRI investing is right for you, and the best vehicles—the methods—you use to accomplish it.


First layer… the three lenses that are used to look at companies and their practices, referred to as ESG:

  • Environment, such as low carbon emissions
  • Social, such as benefits to certain social groups
  • Governance, such as affecting how public companies are managed

Next layer…. the methods of SRI investing:

  • Index funds – passively managed baskets of securities that are screened against various SRI criteria
  • Mutual Funds – actively managed baskets of securities that a portfolio team manages to a specific SRI mandate 
  • Individual securities – stocks or bonds of companies that are engaged in SRI practices

Final layer… screening approaches:

  • Positive/best-in-class screening – when ESG criteria is used to add securities to a portfolio based on their products, actions, and impact.
  • Negative/exclusionary screening – when ESG criteria is used to avoid or eliminate securities from a portfolio based on their products, actions, or impact.
  • Sustainable Thematic investing – when you invest in assets that have a specific focus, or theme, on sustainability practices (i.e., clean energy, green technologies, alternative fuels).

These approaches can be used separately or together.

And did I mention there are many, many companies that do different types of screening with dozens of criteria for each aspect of ESG? So many choices, so little time. It can be daunting.

This tells us that SRI investing is not a fad, it’s a rework of the way we think about the markets. As with any major adjustment to behavior, this takes time but can be incredibly worthwhile to you personally, and maybe even the world.

Remember, crash diets don’t work—similarly, don’t try to gut renovate all your investments at once. Take it one step at a time. If you do your homework (or get your advisor to do it for you) and stay deliberate and disciplined, it might be easier being green after all.