About the project
In January 2016, the PRI, UNEP FI and The Generation Foundation launched a three year project to end the debate on whether fiduciary duty is a legitimate barrier to the integration of environmental, social and governance issues in investment practice and decision-making.
This follows the publication in September 2015 of Fiduciary Duty in the 21st Century by the PRI, UNEP FI, UNEP Inquiry and UN Global Compact. The report concluded that “Failing to consider all long-term investment value drivers, including ESG issues, is a failure of fiduciary duty". It also acknowledged that despite significant progress, many investors have yet to fully integrate ESG issues into their investment decision-making processes.
The project has three main components:
In November 2017, the project was recognized by Investments and Pensions Europe with a gold award for Outstanding Industry Contribution.
Two years into the programme, the December 2017 Fiduciary Duty in the 21st Century Progress Report reflects on the changing landscape of fiduciary duty across the globe, including encouraging signs of progress.
The European Commission High-Level Expert Group (HLEG) released its final report on 31 January 2018 providing a roadmap to achieve a more sustainable financial system across the European Union. Drawing upon findings from Fiduciary Duty in the 21st Century, the second priority recommendation is to clarify investor duties to better embrace long-term horizon and sustainability preferences. The HLEG also advised the European Commission to propose an EU Omnibus Directive on investor duties and sustainability, which would be a key milestone towards the transition to a sustainable financial system.
This follows the publication in September 2015 of Fiduciary Duty in the 21st Century by the PRI, UNEP FI, UNEP Inquiry and UN Global Compact. The report concluded that “Failing to consider all long-term investment value drivers, including ESG issues, is a failure of fiduciary duty". It also acknowledged that despite significant progress, many investors have yet to fully integrate ESG issues into their investment decision-making processes.
The project has three main components:
- Working with investors, governments and intergovernmental organisations, to develop and publish an international statement on fiduciary duty, which includes the requirement to integrate ESG issues into investment processes and practices.
- Publishing and implementing roadmaps on the policy changes required to achieve full integration of ESG issues in investment processes and practices across eight countries.
- Extending the research into fiduciary duties – and, more broadly, investor duties – to six Asian markets: China, Hong Kong, India, Korea, Malaysia and Singapore.
In November 2017, the project was recognized by Investments and Pensions Europe with a gold award for Outstanding Industry Contribution.
Two years into the programme, the December 2017 Fiduciary Duty in the 21st Century Progress Report reflects on the changing landscape of fiduciary duty across the globe, including encouraging signs of progress.
The European Commission High-Level Expert Group (HLEG) released its final report on 31 January 2018 providing a roadmap to achieve a more sustainable financial system across the European Union. Drawing upon findings from Fiduciary Duty in the 21st Century, the second priority recommendation is to clarify investor duties to better embrace long-term horizon and sustainability preferences. The HLEG also advised the European Commission to propose an EU Omnibus Directive on investor duties and sustainability, which would be a key milestone towards the transition to a sustainable financial system.
Over a decade towards the modern interpretation of fiduciary duty
The origins of the modern interpretation of fiduciary duty date back to 2005. Previously, the commonly held view on the correct interpretation of the law was that fiduciary duties require a portfolio manager solely to pursue profit maximisation. Thus, prior to 2005, the integration of environmental, social and governance (ESG) issues in investment practice and decision-making was vastly ambiguous and often resisted based on a belief that taking account of such issues was legally prevented.
In October 2005, a group of United Nations Environment Programme Finance Initiative (UNEP FI) asset managers together with Freshfields Bruckhaus Deringer, a leading international law firm, published a ground-breaking report titled A Legal Framework for the Integration of Environmental, Social and Governance Issues into Institutional Investment.
Widely referred to as the “Freshfields Report”, the landmark report argued that, “integrating ESG considerations into an investment analysis so as to more reliably predict financial performance is clearly permissible and is arguably required in all jurisdictions,” and became the single most effective document for promoting the integration of ESG issues into institutional investment.
In the four years after the launch of the original Freshfields Report, there was more innovation and evolution in the field of ESG integration than in any other similar time span in history. In the context of the 2008-2009 Global Financial Crisis and the predicted ‘Natural Resources Crisis’, it seemed possible that many fiduciaries would look for new approaches to steward and allocate their assets. Furthermore, historically, some world leaders voiced the urgency to combat climate change, the crucial role of finance and business, and the need for a long-term approach.
Thus in 2009, UNEP FI produced a sequel to the “Freshfields Report” titled Fiduciary Responsibility: legal and practical aspects of integrating environmental, social and governance issues into institutional investment. This follow-on report, termed “Fiduciary II”, provides a legal roadmap for fiduciaries looking for concrete steps to operationalise their commitment to responsible investment.
10 years on much progress had been made since the publication of the Freshfields Report in 2005, but even more can and must be done, which is the aim of this project on Fiduciary Duty in the 21st Century.
Read all of the project-related reports on the Publications page.
In October 2005, a group of United Nations Environment Programme Finance Initiative (UNEP FI) asset managers together with Freshfields Bruckhaus Deringer, a leading international law firm, published a ground-breaking report titled A Legal Framework for the Integration of Environmental, Social and Governance Issues into Institutional Investment.
Widely referred to as the “Freshfields Report”, the landmark report argued that, “integrating ESG considerations into an investment analysis so as to more reliably predict financial performance is clearly permissible and is arguably required in all jurisdictions,” and became the single most effective document for promoting the integration of ESG issues into institutional investment.
In the four years after the launch of the original Freshfields Report, there was more innovation and evolution in the field of ESG integration than in any other similar time span in history. In the context of the 2008-2009 Global Financial Crisis and the predicted ‘Natural Resources Crisis’, it seemed possible that many fiduciaries would look for new approaches to steward and allocate their assets. Furthermore, historically, some world leaders voiced the urgency to combat climate change, the crucial role of finance and business, and the need for a long-term approach.
Thus in 2009, UNEP FI produced a sequel to the “Freshfields Report” titled Fiduciary Responsibility: legal and practical aspects of integrating environmental, social and governance issues into institutional investment. This follow-on report, termed “Fiduciary II”, provides a legal roadmap for fiduciaries looking for concrete steps to operationalise their commitment to responsible investment.
10 years on much progress had been made since the publication of the Freshfields Report in 2005, but even more can and must be done, which is the aim of this project on Fiduciary Duty in the 21st Century.
Read all of the project-related reports on the Publications page.
Contact the project team.
Partner organisations:
Partner organisations:
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