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Fiduciary Duty: ESG in Investment Decisions

The PRI, UNEP FI, UN Global Compact and the UNEP Inquiry have issued a new report this week called Fiduciary Duty in the 21st Century. The report examines how fiduciary responsibilities of institutional investors and investment intermediaries have changed.  The report states that investment decisions now require consideration of environmental, social, and governance (ESG) factors and a longer-term perspective on corporate value as a matter of fiduciary duty.

Acknowledging that there are still be differences of opinion on whether ESG considerations are legally required as a matter of fiduciary duty, the report notes:

“Factors such as globalisation, population growth and natural resource scarcity, the internet and social media, and changing community and stakeholder norms all contribute to the evolution in the relevance of ESG factors to investment risk and return. This necessarily changes the standards of conduct required of fiduciaries to satisfy their duties under the law.”

The report includes global and country specific roadmaps for requiring institutional investors, intermediaries, and policymakers to integrate ESG into the decision-making processes. It is expected that UNEP FI and PRI will seek support from investors and regulatory authorities to implement the recommendations suggested in the report during the coming year.

For more information you may access the full report is here.