What is Trust Based Investing™?
Quite simply, Trust Based Investing™ supports public companies that embrace a long-term stakeholder perspective and exhibit high levels of trustworthy behavior. These responsible companies are evaluated on five metrics in the following order:
- Exceptional corporate governance and accounting integrity
- Strong and stable financials
- Outstanding transparency and sustainability practices.
In 2007 a small team from New Jersey set a goal to develop a rigorous approach to understanding and evaluating trustworthy business practices. We spoke to dozens of academic and corporate experts and consultants across a wide range of specialized silos relating to responsible corporate behavior- ethics, integrity, reputation, ESG (Environment, Social Governance), CSR (Corporate Social Responsibility), finance, accounting, and sustainability to get their input on this elusive definition of trustworthiness.
This collaborative effort led us to construct a holistic definition and measurement of trustworthy corporate behavior that we call FACTS®. It allows us to provide meaning, definition and measurement to both the business and behavioral side of trust. Using this framework, we ran the FACTS® model again historical public data for almost 3000 public companies from 1998-2010.
We then developed a methodology for converting our research into a series of products that would meet the needs of those looking to incorporate trustworthy behavior into their investment decisions, thereby rewarding those companies acting in the most trustworthy manner.
The Methodology is Very Simple:
Trust Across America’s FACTS® Model examines trustworthy corporate performance in five key areas:
|Financial stability and strength|
A small sample of the 500+ metrics is shown below.
- Financial strength and stability data:
- Cash flow compared to market capitalization
- Change in return on equity
- Accounting data:
- Accounts receivable over sales
- Underfunded pension benefits over liabilities
- Corporate Integrity data:
- Litigation and regulatory issues
- Incentive compensation compared to annual compensation of the CEO & CFO
- Transparency data:
- Political policies and disclosure
- Workforce metrics policies and disclosure
- Sustainability data:
- Community involvement policies and programs
- Employee rated measures including level of benefits and workforce disclosure policies
Our research suggests that high levels of trustworthy behavior may lead to:
- Enhanced stock performance
- Better stakeholder relationships
- Increase in long-term value
What makes us different?
- We do not follow the S&P forced sector allocation model
- Our selection process is unique- our universe starts with the “most trustworthy companies” based on corporate governance, not financial metrics
- We use two separate and independent financial screens, starting with growth and followed by value
How can you use FACTS™?
Look for information soon on upcoming investment products based on the FACTS® model, or contact us directly at email@example.com.