Through a series of events, interviews, case studies and a legal review, this report aims to end the debate about whether fiduciary duty is a legitimate barrier to investors integrating environmental, social and governance (ESG) issues into their investment processes.
In the decade that followed, many asset owners have made commitments to responsible investment. Many countries have introduced regulations and codes requiring institutional investors to take account of ESG issues in their investment decision-making. These changes – in investment practice and in public policy – demonstrate that, far from being a barrier, there are positive duties on investors to integrate ESG issues.
When evaluating whether or not an institutional investor has delivered on its fiduciary duties, both the outcomes achieved and the process followed are of critical importance. For example, a decision not to invest in a high-carbon asset because of financial concerns about stranded assets is likely to be seen as consistent with fiduciary duties, providing that the decision is based on credible assumptions and robust processes.
Despite significant progress, many investors have yet to fully integrate environmental, social and governance issues into their investment decision-making processes.