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Values-Based Investing Gaining Steam, Data Shows

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Values-driven investing is gaining steam in the money management industry.

The number of investment products focused on environmental, social and governance factors has risen steadily in the last seven years, according to data provided by Morningstar, climbing to 277 total funds as of Oct. 31, 2013, from 199 in 2007.

"There is real investment infrastructure being built in the [values-based investing] space," says Ron Cordes, executive co-chairman of Concord, Calif.,-based AssetMark, which provides investment platforms to around 4,000 financial advisors. "Investors are increasingly going to their advisors asking for us to include [these funds] in their portfolios."

In response to the resulting advisor demand, Cordes says, AssetMark -- which was known as Genworth Wealth Management until a 2013 acquisition by two private equity firms -- plans to launch new values-based investing funds in 2014.

Emily Bannister, director of research at Boston-based Federal Street Advisors, says asset management companies are taking value-based investing -- once called socially responsible investing, and now often referred to as impact or sustainable investing -- into account when researching performance. Investors and advisors have lifted demand for investments that align well with certain social causes such as climate change.

Bannister also emphasizes an industry shift that has investors now rewarding companies for strong social- or values-related performance rather than simply screening out negative factors. Performance in these funds has also improved in recent years, she says.

"We do see a lot of investors who are looking for more sustainability options," she says. "A lot of it is both mission-driven but also performance-driven. We're seeing strong performance and sustainability is often going hand in hand."

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