how successful they’ve been, not just in terms of money and traditional business success, but in their lives overall,” says Jed Emerson, a senior fellow at London’s Generation Foundation and a leader in the values-based investing movement. “More than just a big bank account, they want to leave their kids a legacy of having done positive things with their wealth and talents.”

Merrill Lynch Private Wealth Advisor Hilary Giles says that her team’s clients, many of whom are young, ambitious entrepreneurs who have made their wealth in tech startups, ask about ways to structure their personal finances according to their values. “They have tremendous optimism about their ability to change the world,” she says. Adds Elliot Berger, Director of Foundations and Strategic Philanthropy at the Merrill Lynch Center for Philanthropy & Nonprofit Management: “Clients increasingly expect to work with their advisors to build investment strategies that reflect the full set of their goals, including the intersection of financial, social and environmental values.”

As with any investment, the return rates and risks of values-based investments vary widely, “so they must be carefully selected to complement a balanced portfolio,” Wolfe says. Merrill Lynch clients work with Merrill Lynch advisors to determine what percentage of overall assets to devote to values-based investments, what returns to expect and which types of investments offer the necessary diversification. “This is a form of portfolio customization that isn’t radically different from other ways of investing,” Wolfe says. “Your portfolio must continue to manage risk and growth to cover inflation and taxes and still allow the assets to appreciate.”

Shares in individual companies, of course, hold the potential for high returns (along with elevated risk, if the company founders). Besides evaluating a prospective company’s track record, potential for growth and other indicators of financial health, a values-based investor should also seek information on how the company stacks up against a variety of environmental or social criteria. A growing number of research firms, among them ASSET4 AG, which announced a strategic alliance with Merrill Lynch in September 2007, offer details on major companies’ economic, environmental, social and corporate governance performance. Investors can customize these reports to give priority to the issues most important to them.

In Europe, where climate change and environ- mental conservation top the list of concerns for values-based investors, the newly launched Carbon Leaders Europe Index assesses European companies based on the size of their carbon footprint (the environmental friendliness of their practices) as well as their price/earnings ratios. “Just because a company is ethical or environmentally friendly doesn’t automatically make it a good investment,” says Zoe Knight, Senior Director of Socially Responsible Investing for Merrill Lynch. “Ethical investors apply as much rigor to financial analysis as any other investor. The index offers exposure to companies that have low carbon footprints within their sectors and are favorably valued.”