In January 2016 the PRI, UNEP FI and The Generation Foundation launched a four-year project to clarify investor obligations and duties (known in common law markets as fiduciary duties) in relation to the integration of environmental, social and governance (ESG) issues in investment practice and decision making.
The project involved working with investors, governments and intergovernmental organisations:
This is the final report from that project. It replaces the original 2015 report which found that the “failure to consider all long term investment value drivers, including ESG issues, is a failure of fiduciary duty”. Despite significant progress, many investors were not fully integrating ESG issues into their investment decision making processes, necessitating regulatory clarification.
The origins of the modern interpretation of fiduciary duty date back to the landmark 2005 Freshfields Report, commissioned by the United Nations Environment Programme Finance Initiative (UNEP FI) Asset Management Working Group. Whereas there was relatively little change in the law relating to fiduciary duty between 2005 and 2015, there has been a great deal of development in the past few years. This report describes how the integration of ESG issues into investment practice and decision making is an increasingly standard part of the regulatory and legal requirements for institutional investors, along with requirements to consider the sustainability-related preferences of their clients and beneficiaries, and to report on how these obligations have been implemented. It also identifies areas where further work is required and reflects on how investors’ duties and obligations may further evolve over time.
This report looks at fiduciary duty across eight markets (US, Canada, UK, Germany, Brazil, Australia, Japan and South Africa) through a series of events, interviews, case studies and a legal review.