Socially Responsible Investing (SRI) focuses on companies that promote a variety of environmental stewardship, consumer protection, human rights, and diversity issues. Some feel strongly about SRI, others are only mildly interested, and it’s a non-issue for many investors. Regardless of your politics, I thought you would be interested in some early thoughts on SRI issues in the upcoming Trump era.
Environment: Trump thinks global warming is a hoax and plans to scrap recent regulations concerning carbon emissions as well as encourage domestic fossil fuel production. He has called for abolishing the EPA. While this is unlikely, he can significantly curb its power and will surely work to reduce many environmental regulations. Some resources taken away from climate change programs may be reallocated into clean water and other infrastructure projects.
Social: While Trump wants to create more jobs, evidence does not point to Trump being an advocate of equal employment opportunities, diversity, or labor rights. He is likely to take a tough stance on countries that have repressive regimes or sponsor terrorism, which typically have poor human-rights records. Also, while he seems to be a proponent of a strong military, he has already put defense contractors in the cross-hairs for cost overruns. Trump’s stance on immigration and Muslims may also affect publicly traded companies.
Corporate Governance: Trump may “dismantle” the Dodd-Frank Act, which was put in place to curb banks from causing another financial crisis. Despite having many friends and supporters in big business, Trump called CEO pay a “disgrace” and railed about Wall Street “getting away with murder”. While Trump helped keep the Office of Congressional Ethics intact, his efforts to minimize potential conflicts of interest regarding his own business interests seem lackluster.
Evidence exists that a broad-based SRI strategy does not mean sacrificing performance or taking on additional risk compared to traditional investment approaches. I offer my clients the option of adding a Socially Responsible Investment component to their portfolio at no extra cost. If you are interested in learning more about my investment approach or SRI, please call me at 908-595-2220.