Now that the year has drawn to\u00a0<\/span>a close and a new one has begun, I am reminded of the similarities between the 2008 financial crisis and the market instability of 2022. In fact as Reuters recently reported, Wall Street ended the year with the biggest annual drop since 2008, as the global stock and bond markets shed more than $30 trillion dollars. And sadly as we head into 2023, the prevailing mood among both investors and the general public is fear, and fear is the opposite of trust. The chart below shows the outcome when trust replaces fear.<\/span><\/p>\n What lessons, if any, has the investment community learned over the past 14 years? <\/b><\/span><\/p>\n Consider these:<\/span><\/p>\n How do we learn from these lessons and move forward as we head into 2023? The solution is very simple. The industry must turn its attention to building trust.<\/span><\/p>\n Trustworthy companies outperform their peers with less risk<\/b><\/span><\/p>\n In the wake of the financial crisis I started a program called Trust Across America with the mission of helping organizations build trust. One of our first challenges was to make the \u201cbusiness case for trust\u201d having been told that without proving that trust works, business leaders would ignore us. With the assistance of dozens of cross silo professionals, in 2012 we finalized a model to evaluate the trustworthiness of public companies, incorporating quantifiable metrics and data and named it the FACTS\u00ae Framework<\/span><\/a>, an acronym that includes five drivers or indicators of trustworthy business behavior. They are:<\/span><\/p>\n When we began this research over ten years ago we were also told that a ten year tracked record would be required before serious consideration could be given to our model. Having recently reached that milestone, in June 2022 we retained Index One, a global index creation firm based in London to evaluate\u00a0our\u00a0FACTS\u00ae Framework versus major US indexes.\u201d The results:<\/span><\/p>\n Further evidence of the outperformance of trustworthy companies is contained in t<\/span>his ten+ year study<\/span><\/a> published in November 2021, and covered in Investor\u2019s Daily<\/span><\/a> in May 2022. It is, by order of magnitude, the most comprehensive and data driven analysis available regarding the trustworthiness of public companies. It speaks to both the public and the financial industry\u2019s understanding of trust, supports trust based investment decision making and enables targeted and simplified trust portfolio construction.\u00a0<\/span><\/p>\n V<\/span>ast amounts of money remain parked in low yielding money market accounts and other underperforming investments. By delivering a time tested and \u201cbeyond reproach\u201d strategy to investors combining the key drivers of corporate trustworthiness, Trust Based Investing can become the solution that both the industry and the public has been seeking.<\/span><\/p>\n Some may be curious as to how our Trust Index performed in 2022. We finished up close to 1% in a year when the S&P 500 declined almost 20%.<\/span><\/p>\n Don\u2019t Take Our Word for the Importance of Trust<\/b><\/span><\/p>\n Building a trustworthy business will improve a company\u2019s profitability and organizational sustainability. A growing body of evidence shows increasing correlation between trustworthiness and superior financial performance. Over the past decade, a series of qualitative and quantitative studies have built a strong case for senior business leaders to make stakeholder trust building a high priority. While none of these studies are perfect, their results are becoming increasingly difficult to ignore.<\/span><\/p>\n In conclusion<\/b><\/span><\/p>\n The business case for both trust and Trust Based Investing is being made. Trust Based Investing provides the following:<\/span><\/p>\n In the words of Warren Bennis \u201cTrust is the lubrication that makes it possible for organizations to work.\u201d<\/i><\/span><\/p>\n Barbara Brooks Kimmel <\/i><\/a><\/span>is an author, speaker, product developer and global subject matter expert on trust and trustworthiness. Founder of Trust Across America-Trust Around the World she is author of the award-winning <\/i>Trust Inc., Strategies for Building Your Company\u2019s Most Valuable Asset<\/i><\/span><\/a>, Trust Inc., 52 Weeks of Activities and Inspirations for Building Workplace Trust and Trust Inc., a Guide for Boards & C-Suites. She majored in International Affairs (Lafayette College), and has an MBA (Baruch- City University of NY). Her expertise on trust has been cited in Harvard Business Review, Investor\u2019s Business Daily, Thomson Reuters, BBC Radio, The Conference Board, Global Finance Magazine, Bank Director and Forbes, among others.\u00a0<\/i><\/span><\/p>\n To obtain more information please visit <\/i>the contact page<\/i><\/span><\/a> on our website or<\/i><\/span><\/p>\n![\"\"](\"https:\/\/www.trustacrossamerica.com\/blog\/wp-content\/uploads\/Screen-Shot-2022-12-24-at-10.04.34-AM.png\")
<\/a><\/p>\n\n
\n
\n
![\"\"](\"https:\/\/www.trustacrossamerica.com\/blog\/wp-content\/uploads\/Screen-Shot-2022-12-31-at-10.02.05-AM.png\")
<\/a><\/p>\n\n
\n