Fiduciary Duties

Fiduciary duty requires institutional investors to act in the best interests of their beneficiaries, exercising prudence, loyalty, and care in investment decision-making.

The interpretation of fiduciary duty has evolved significantly to encompass ESG considerations. The PRI's Fiduciary Duty in the 21st Century programme established that failing to consider ESG factors that are financially material is a failure of fiduciary duty. This interpretation has been reinforced by legal opinions, regulatory guidance, and legislative changes across jurisdictions. The EU's SFDR and IORP II Directive explicitly require consideration of sustainability risks. The UK's Law Commission has confirmed that ESG factors may be considered where financially material. The US Department of Labor has clarified that ERISA fiduciaries may consider ESG factors in investment decisions.

Further Reading

• G20/OECD Principles of Corporate Governance
• ESRS

Key Resources

• PRI Fiduciary Duty in the 21st Century
• UNEP FI

Related Topics

• Board Responsibilities
• Disclosure & Transparency
• Sustainability & Resilience