Wealth and values: investing beyond financial return

While trustees of private trusts remain primarily focused on achieving appropriate financial returns for beneficiaries, many are now being asked to consider how trust investments align with family values, responsible stewardship and broader long-term objectives.

Why this matters 

The private wealth landscape is changing. Families often span multiple generations and jurisdictions, while younger beneficiaries are taking a more active interest in how wealth is managed. As a result, trustees, particularly professional trustees who are not themselves beneficiaries, increasingly find themselves balancing financial objectives with wider considerations relating to sustainability, responsible stewardship and family values, while ensuring that their decisions remain consistent with their fiduciary duties and capable of withstanding beneficiary scrutiny. The ongoing transfer of wealth between generations is likely to accelerate this trend as younger family members bring different perspectives to investment and stewardship. 

The blurring of philanthropy and investment 

One of the most significant developments in recent years has been the rise of responsible and impact investing. Families increasingly seek to generate financial returns while also supporting positive social or environmental outcomes through their investment decisions. 

This can allow capital to be deployed in a manner that reflects family values without requiring a separate philanthropic structure. However, it also raises important questions for trustees. To what extent should non-financial considerations influence investment decisions? How should trustees respond where beneficiaries hold different views? How should trade-offs be managed if broader objectives affect investment performance? 

Unlike charitable trustees, whose decisions are assessed against a charity’s purposes, private trustees must principally consider the interests of beneficiaries, the terms of the trust and, where relevant, the settlor’s wishes. 

Managing potential trade-offs 

A common concern is that responsible or impact-focused investing necessarily comes at the expense of financial returns. In practice, the position is often more nuanced. 

Environmental, social and governance (“ESG”) factors are increasingly viewed as part of mainstream investment analysis and risk management. Responsible investment strategies may identify risks and opportunities that traditional financial analysis alone might overlook. However, particular strategies may underperform in some circumstances, especially over shorter investment horizons. 

Trustees should therefore avoid assumptions in either direction. They should consider whether performance outcomes arise from market conditions, implementation issues or the strategy itself, and remain alert to the risk of “greenwashing”. 

The key question is rarely whether a decision ultimately proves successful in hindsight. Rather, it is whether trustees have followed an informed and well-documented decision-making process that can be justified by reference to the trust’s objectives. 

The starting point 

In the charitable context, a sensible place to begin is the investment policy. For private trusts, trustees should review the trust deed together with any letter of wishes, family charter or similar governance document that provides guidance on family values and objectives before formulating an investment policy. These documents may help determine the extent to which non-financial considerations can properly influence investment decisions. 

The investment policy should then translate those objectives into practical guidance by identifying investment goals, any relevant restrictions or exclusions, and the framework for reviewing decisions over time.  Many trusts find that their investment policies have evolved incrementally and no longer reflect current family circumstances. Periodic review can therefore be valuable. 

Understanding responsible investment 

One challenge is terminology. Responsible investment exists on a spectrum and may include: 

• • screening – excluding particular industries or activities;

• • ESG integration – incorporating environmental, social and governance factors into investment analysis;

• • thematic investing – focusing on long-term trends and societal developments;

• • stewardship – using investor influence to encourage positive corporate behaviour and protect value; and

• • impact investing – seeking measurable social or environmental outcomes alongside financial returns. 

Trustees do not need to become experts in every approach. What matters is developing a clear understanding of the trust’s objectives and ensuring advisers understand the outcomes being sought. 

Governance and beneficiary engagement 

Responsible investment often prompts discussion about whose views should be taken into account. While trustees remain responsible for decision-making, engagement with settlors, beneficiaries, family councils and family office representatives can be valuable. 

This is particularly so where different branches of a family hold different views regarding stewardship and wealth. Open communication can help manage expectations and reduce the potential for future disputes. 

Good governance remains essential. Trustees should maintain appropriate records, document their reasoning and ensure that significant decisions are capable of explanation. In some circumstances, separate sub-funds or investment pools may assist where beneficiary groups have materially different investment philosophies. 

Emerging legal developments 

Some jurisdictions are beginning to address responsible investment more explicitly. Bermuda has amended its trust legislation to permit trustees to take account of wider social and environmental wishes, while a number of US states have introduced legislation recognising the ability of trustees to consider beneficiary values alongside traditional prudent investor principles. 

Elsewhere, the position continues to be governed largely by existing trust law principles. Regardless of jurisdiction, trustee judgement, careful governance and clear documentation remain critical. 

Conclusion 

Families increasingly want trustees to consider not only financial performance but also stewardship, sustainability and longer-term impact. For private trusts, however, the starting point remains the pursuit of appropriate financial outcomes for beneficiaries. 

The challenge is therefore not to replace financial return with responsible stewardship, but to determine how wider family values can properly be accommodated within a trustee’s existing fiduciary framework. With appropriate drafting, clear investment policies and robust governance, trustees can ensure that trust assets are managed in a way that is both financially prudent and aligned with the family’s long-term objectives. 

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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