Wealth Advisor

Responsible Investing for the Modern Fiduciary:

Aligning Goals, Duties, Investments & Impact

> Download the white paper [PDF]

Responsible investing is attracting the attention of investors and investment professionals, philanthropists and philanthropic organizations, and trustees and beneficiaries, particularly those identified as next generation “emerging wealth.”

Investors have various motivations for incorporating responsible investing considerations into their portfolios. Some desire to first and foremost “do good” with their financial resources (commonly referred to as “impact first” investment). Some are committed to aligning their investments with their values and, at a minimum, not supporting what they consider to be harmful through their investments. It is from this orientation that the phrase “sin stocks” has emerged. Others have mandated goals – environmental or social for example – arising from reputational or political considerations. And some act on a belief that “responsible” companies will outperform over a long time horizon.

Whatever the motivation, fiduciary investors face some unique considerations as they address responsible investment for the simple reason that they invest not for themselves, but for others, subject to strict fiduciary duties with a high bar. With an exclusively financial view of investment, the concern is the risk of under-performance. But that is not necessarily the end of the conversation. The next question is, in what circumstances are factors in addition to financial return appropriate to consider? If “sin stocks” historically out-perform, is it only prudent for a fiduciary to have a sin-tilted investment portfolio? (Asked rhetorically.) Do the interests of beneficiaries include non-financial elements?

In this paper, we highlight current trends in responsible investing, provide an overview of general concepts and an analysis of issues of particular significance for investors with fiduciary obligations, and conclude with a discussion of the implementation of a responsible investment strategy in the fiduciary context. Read more.

The opinions expressed here are those of the authors and do not necessarily reflect those of the Northern Trust Corporation or its subsidiaries. The information has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Any opinions expressed herein are subject to change at any time without notice. Any person relying upon this information shall be solely responsible for the consequences of such reliance.
IRS CIRCULAR 230 NOTICE: To the extent that this communication or any attachment concerns tax matters, it is not intended to be used, and cannot be used by a taxpayer, for the purpose of avoiding penalties that may be imposed by law. For more information about this notice, see https://www.northerntrust.com/circular230.
 
 
 
 
 
 

OUR EXPERT

 
Suzanne L. Shier
Suzanne L. Shier
Wealth Planning Practice Executive & Chief Tax Strategist/Tax Counsel
 
 
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