Ethics, politics, sustainability and the 21st century trustee

Abstract

Purpose

This chapter describes a number of the ethical, political, and sustainability implications inherent in the investment process; clarifies when and to what extent these implications can manifest themselves; and examines the circumstances under which trustees might wish to consider the relation these implications to the management of their assets.

Methodology/approach

The arguments made in the chapter are theoretical and based on analyses of historical concepts of fiduciary duty and investment management.

Findings

The chapter concludes that in seeking to achieve their primary tasks of acting in beneficiaries’ interests and preserving assets and income, trustees may wish to consider the ethical, political, and sustainability implications of their investment decisions in the light of broadly accepted norms or scientific consensus. If trustees choose to incorporate these considerations, their decisions should be commensurate with the levels of concern raised by these issues, be potentially effective, not impair financial goals, and not require excessive expenditure of resources.

Research and practical implications

The conclusions of the chapter imply that trustees acting on beneficiaries’ behalf may wish to assess the broad-based, value-creation potential of their investment decisions along with the potential of these decisions to impact portfolio performance relative to asset-specific benchmarks. Considerations of value creation can be in beneficiaries’ interests to the extent that they contribute to strong economies, safe and livable societies, and the preservation or enhancement of natural resources. Additional research is needed to elaborate on how consideration of these types of value creation affects asset allocation and specific security selection, along with its impacts on short-term and long-term financial returns.

Originality of chapter

This chapter reflects on the role of ethical, political, and sustainability (EPS) concerns in investment processes. Specifically it considers why, when, and how EPS concerns might be considered by trustees.

Citation

Lydenberg, S. (2014), "Ethics, politics, sustainability and the 21st century trustee", Socially Responsible Investment in the 21st Century: Does it Make a Difference for Society? (Critical Studies on Corporate Responsibility, Governance and Sustainability, Vol. 7), Emerald Group Publishing Limited, Leeds, pp. 197-213. https://doi.org/10.1108/S2043-905920140000007008