Sustainability is not only important to upholding fiduciary duty, it is obligatory
On Wednesday 29 June 2016 the global launch of an ‘investor statement’ took place at Palais Brongniart, Paris. The statement, which outlines investor obligations and duties to support policy making on the issue of fiduciary duty, was promoted by a number of senior representatives from the financial industry and stakeholders, including:
- Jean Boissinot, Direction Générale du Trésor, French Treasury
- Philippe Desfossés, Director, ERAFP
- Emmy Labovitch, Financial Affairs Division, OECD
- Fiona Reynolds, Managing Director, PRI
- Eric Usher, Head, UNEP Finance Initiative
- Jane Ambachtsheer, Partner, Mercer
Fiduciary Duty 21st Century: Global statement on investor obligations and duties
Sustainability is an important factor in the long-term success of a business. Therefore as with any other issue related to the prudent management of capital, considering sustainability is not only important to upholding fiduciary duty, it is obligatory.
We believe that investors and other organisations in the investment system must:
- Act with due care, skill and diligence, in line with professional norms and standards of behaviour.
- Act in good faith in the interests of their beneficiaries and clients, including avoiding conflicts of interest, or where such conflicts are unavoidable, to balance and disclose such conflicts.
- Take account of environmental, social and governance (ESG) issues, in their investment processes and decision-making, encourage high standards of ESG performance in the companies or other entities in which they are invested, and support the stability and resilience of the financial system.
Many of these obligations and duties are already expressed in various ways under the law in different jurisdictions. However, we recognise that there are gaps and variations in both the specific obligations and duties that are placed on investors, and in the manner in which these are interpreted and implemented in each jurisdiction. We specifically note a lack of explicit mechanisms for investors to take account of ESG issues in their investment processes, in their dialogue with companies, and in their engagement with policymakers.
While many investors meet and frequently exceed these obligations and duties, we believe that effective policy can both clarify these obligations and duties and enhance the effectiveness of existing practices. This is particularly the case in relation to the adequate consideration of ESG issues in long and short-term investment decision-making.
The investment community’s 21st century challenge
- Call on international and supranational policymakers to clarify investors’ obligations and duties, in particular, in relation to the integration of ESG issues into investment practice.
- Call on national policymakers to ensure that their national policies align with this clarification of investors’ obligations and duties and to ensure that these policies are effectively implemented.