As the founder and CEO of Ski Butlers equipment rentals in Park City, Bryn Carey has a financial incentive to care about climate change—less snow means less business. His concern about climate change has led him to advocate for clean energy, electric vehicles, and carbon offsets that would make his business net zero.

But just before the pandemic, Carey came across the Banking on Climate Chaos report, which tracks the amount of money major banks and financiers invest in fossil fuels. He discovered, to his dismay, that his bank topped the list as the largest financier of fossil fuels, apparently undermining his own efforts to eliminate carbon emissions.

“Here I am spending all this time finding solutions to climate change,” Carey says, “and yet, if you follow the money, all my money’s going to the largest fossil fuel financier.”

Carey resolved to move his money to a bank that did not invest in fossil fuels, joining a growing number of professionals who have changed their financial strategies to align with their personal values. Values-driven investment funds have existed for decades, and fund managers say that investors are increasingly concerned about the nature of the businesses their money supports. 

Utah is no exception. While local investors have some of the same interests as their national counterparts, including environmental and social concerns, Salt Lake City financial advisors say they also receive unique requests from clients who abstain from tobacco and alcohol. And as this trend grows, they say, new investment options will make values-tailored portfolios available to an even larger number of Utahns.

“Most people are still looking to make sure they reach their financial goals,” says Sam Watkins, chief investment officer for TrueNorth Wealth financial advisors in Salt Lake City. But among his clients, he says, one in every 10-20 has asked about ethical investment options. “It’s still a pretty small minority, but it’s increased exponentially, where we wouldn’t have had a single question five years ago. The pace means it will be pretty significant down the road.”

Blame the millennials

The notion that a person’s investment strategy should align with their values isn’t particularly new, says Matt Orsagh, senior director of capital markets policy at CFA Institute, a nonprofit focused on ethics and professional training for financial analysts. 

For decades, religious individuals and institutions have set up funds that exclude companies with products such as tobacco, firearms, and pornography. In the 1990s, the concept of investing based on social concerns emerged during the negotiations to end the apartheid system in South Africa. Then in the mid-2000s, the United Nations wrote up a set of guidelines for principled investing that focused on minimizing environmental and social harms, Orsagh—who joined the CFA Institute in 2005—recalls.

Traditionally, values and ethics-oriented investment funds have focused on screening out specific concerns—carbon emissions or unfair business practices, for example. But in recent years, Orsagh says a growing number of investors have begun to pursue funds that emphasize environmental and social impacts on the belief that these funds will outperform standard options. These two trends have combined over the past three to five years to create a wave of interest in so-called ESG, or environment, social, and governance funds.

“There are two different ways of looking at things that can lead to the same place,” Orsagh says. “Someone might not want to invest in oil and gas companies, or someone might say that over the next ten years, those companies are going to be challenged.” The latter group, he says, makes investment decisions on the belief that government policy and public sentiment will cause funds invested in oil and gas companies, or companies that engage in unfair labor practices, to underperform in the years to come.

Technology has also played a role in allowing more investors to make values-based decisions about their portfolios, Watkins says. Historically, only very wealthy individuals could select or exclude specific sectors or issues such as emissions—those goals required having an individually managed account and enough money to buy full shares in companies of interest. Today with the availability of partial shares, a growing number of funds, and a host of new digital tools, the threshold for ethical investing has decreased considerably, enabling more people to participate, Watkins says.

But Isaac Smith, a professor of organizational behavior at Brigham Young University’s Marriott School of Business, believes the rise of ethical investing is tied to broader intergenerational changes in how Americans think about work and money. Before the millennial generation, he says, most Americans thought of work and life as separate domains. Work was simply a means of earning a paycheck, and money was merely a means of paying bills.

Those who began their careers in the 2000s and later tend to have a different perspective. Work is a means of meaning and fulfillment, and what they do with work—and how they spend their money—reflects their overall identity. Smith says younger workers are likely to choose an investment strategy as a reflection of who they are, especially among individuals whose sense of self is strongly rooted in their sense of morality.

The Utah way

According to Watkins, interest in ESG funds has increased exponentially over the past five years, and Utah is no exception. But while climate and emissions are still the number one concern among his Utah clients, Watkins says that in his experience, Utahns are more likely to ask about other values-driven investment options, such as excluding tobacco products or alcohol from their portfolios. “People who are not concerned about emissions tend not to be worried about the effects of their investment,” Watkins says. “Tobacco is probably the main one you hear on top of emissions.”

However, Utahns overall aren’t as likely to request ethical investment options as out-of-state interests seem to be concentrated among his coastal clients, Watkins says.

Smith suspects the same factors that drive the unique attributes among Utah’s investors may also explain why the state has lagged behind other regions concerning adopting ethical investment trends. Psychology tells us that humans are prone to moral licensing—that is, believing that if you’ve done a good deed, it makes up for decreased morality in other areas. Watkins says that among his students at BYU, he occasionally encounters an attitude that because they are religious, they don’t need to study ethics in business or consider other questions of morality. 

“The religious component leads to the assumption that we’re already doing things the right way,” Smith says.

“Mormon” culture has also widely adopted a virtue scholars call the Protestant work ethic—or a belief that all work is inherently good, Smith continues. This may lead to a belief among some Utahns that as long as they work hard and contribute to society, their efforts are innately moral. “That parallels with capitalism in general, and Utah as a proponent of capitalism,” Smith says. The prevailing attitude, he says, is one where the “system is set up to encourage people to work hard and the harder you work, the more financial benefits you receive.”

Ian Shelledy has also noticed that Utah’s approach to ethical investments differs from other states in his time as the director of the Community Foundation of Utah, which invests donations to generate sustainable funding for various charitable initiatives. The foundation’s Utah donors do share a growing concern that their funds could be invested in ways that conflict with their long-term goals, Shelledy says, but they’re much more interested in direct investments than in issue-specific funds. Rather than investing in an ESG fund, Utahns are more likely to invest in a startup that makes batteries for solar projects.

But interest in impact investing is growing, in and around Utah, Shelledy says, leading the Community Foundation to look at how it could replicate some of the same ideas seen in ESG funds. The foundation is currently putting together a charitable fund—contributions would be considered donations and would not pay dividends to the donor—that would focus on investing in a portfolio of Utah-based companies to capitalize on local interest in supporting homegrown entrepreneurs.

“Impact investing is a great way to align those incentives and get the return you need,” he says.

Investing for impact

Carey, who had already invested his funds in ESG vehicles and encouraged his employees to do the same by offering retirement options that included ESG funds, changing banks, and moving his business accounts, represented the next step. But in this case, he found himself a bit ahead of the curve.

Finding even a single bank that didn’t invest in fossil fuel companies proved challenging—essentially, no large bank has eliminated oil and gas from its portfolio. Carey says smaller banks were less likely to have ties to fossil fuels, but as they didn’t advertise this fact, it was hard to find out which institutions invested in carbon and which did not. He ultimately considered five banks—personally interviewing three of them—before finding an option that worked.

Despite the frustration, Carey believes the process itself helped further his goals. Not only did he withdraw his funds from a bank that invested his money in fossil fuels, but he also spread the word to five banks about consumer interest in emissions-free funds.

“The amount of money we’re moving isn’t going to change the world,” he says. “The bigger impact is encouraging other people to follow and asking them where they bank.”

Even though Carey was willing to take a financial risk in moving his funds elsewhere, he wasn’t overly concerned about losing money. As with many ESG investors, Carey believes the industries he has excluded from his portfolio will eventually prove poor investments. “In five years, you’re probably not going to want to have any of your money invested in fossil fuels,” he says.

The common wisdom, Orsagh says, is that investors who choose to exclude certain industries or products from their portfolios won’t earn as much as a result of having limited their options. But this isn’t necessarily the case, he says. Like any other kind of investment, ethical funds will underperform at times and overperform at others, depending on market conditions and the specific composition of the investor’s portfolio.

Studies that have attempted to evaluate how ESG funds compare to conventional options haven’t proven particularly reliable, Orsagh continues. Because there is no agreed-upon definition of what it means to be ESG, researchers are free to pick and choose the portfolios they decide to study. “I can find studies saying it’s good for your portfolio, and I can find studies that say it’s bad,” he says. “It’s just about having a better picture of what you’re investing in. I can’t promise it will underperform or overperform.”

But Orsagh does believe that ethically-driven investing might have the potential to sway the market, at least with respect to consumer behavior. While the impact of any one investor is limited—eliminating shares of stock from your portfolio usually entails selling them to someone else with no cost to the company—consumer demand is shifting and does stand to move the needle. If enough consumers buy an EV, quit smoking, or invest with fund managers with strict ESG standards, Orsagh says, the companies that sell those products will take note.

For Carey, this was the primary motivation behind his decision to move all his funds from financial institutions with ties to fossil fuels. He believes his banking choices will help him market his company to consumers with similar values—potentially influencing his competitors to make similar changes to keep up.

“As we look back on this, I think we’re going to see it as not a lot of work for a lot of reward,” Carey says. “So if you don’t believe in drilling for oil in the arctic, don’t put money with a bank that finances that. That’s as simple as it gets.”