Invest for a Trust with Social Responsibility and Political Awareness

Socially responsible investing is becoming more prevalent across all sectors of the investment community. As trustee, you have the choice of investments. Even though many individuals are satisfied with selecting investments based purely on the balance sheets and potential for income generation, many trustees are starting to match their investment strategy to their, the grantor’s, and, in some cases, the beneficiary’s, personal philosophy. An increasing number of options for socially conscious and politically aware investing are available.

You must invest the trust’s principal with a profit motive in mind. So long as a socially responsible corporation or mutual fund can show that it’s acting to produce a profit, you can put trust money there. But if the company is merely concerned with doing good in the world and not with producing profits for its shareholders, you’re required to refrain from investing the trust money in it.

Many major mutual fund companies offer socially responsible mutual funds alongside all their other funds. Some companies offer only socially responsible funds.

Socially conscious investing for a trust

If you want to be socially responsible and conscious, you need to look closely at each corporation’s hiring practices, treatment of their employees, environmental impact, and kinds of goods produced. For example, is the company manufacturing more garbage for landfills, or are they using an environmentally sustainable model in production? In order to be a truly socially conscious investor, you need to study not only the balance sheet, but the corporate philosophy and its implementation.

No corporation is going to be the best in every category you may be concerned with. You may want to create your own set of criteria, focusing on those areas of social responsibility you are and aren’t willing to compromise on. You may find a company that promotes women at the same rate as men but hasn’t reached energy sustainability just yet. Or you may find the perfect corporation, and then discover buried in its annual report the fact that it invests its excess cash in the stock of a corporation you despise. Remember, no corporation is perfectly conscious.

Politically aware investing for a trust

In addition to being socially conscious, many investors are also trying to push one political agenda over another in their choices of investments. There’s some proof that this strategy works. South Africa is a very different place today because investors deserted South African companies as an attempt to force change in that country. At the same time, Cuba is very much the same place today despite sanctions, so the strategy isn’t foolproof.

No laws prohibit buying or boycotting companies based on the countries where they’re located or companies whose stated business purpose supports one political point of view. So long as you, as trustee, are sufficiently convinced that a company has a solid business plan and all the tools in place to turn a profit and add to the trust’s bottom line, that company represents a valid investment for the trust.

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