A Sustainable and Inclusive Capitalist’s Epoch: A Modern Economic and Investment Theory for the Benefit of Our Common Future?

Abstract

Re-allocation of capital in the economy is important to align the attention of the economic and investment environment from short-term profit generation at the cost of sustainable development to long-term value creation amidst the greatest social and environmental changes of our time. This article is set in the context of the growing awareness amongst economic actors, such as institutional investors who play an important role in the allocation of capital in the economy in the first place, on the need to encourage sustainable and inclusive capitalism using an Environmental, Social and Governance centric (ESG) investing approach to help achieve the goals of sustainable development. Nevertheless, a majority of institutional investors across the world consider ESG investing as a sheer moral obligation, which often creates a conflict with their fiduciary duties. This article seeks to analyse the conflict between the fiduciary duty (before and according to law) of loyalty and care owed to beneficiaries and a correlative duty (beyond and besides the law) of loyalty and care to promote sustainable development owed to future generations. An investor’s palpable dilemma: How does one draw a line between this duty and that duty? This article argues for application of the casuistry theory, an antiquated and uncredited art of moral reasoning, to reinterpret the modern prudent investor rule and bring the duty to promote sustainable development within the framework of the legally binding fiduciary duty owed to beneficiaries. This article will further scan the evolving legal jurisdiction of India, an important player in achieving the goals of sustainable development, on the adequacy of disclosures of ESG risks and performance indicators in the Indian capital markets compared to the developments in the UK, EU and USA, so as to disentangle the blurred lines between the causation and correlation of ESG performance with the financial performance of a company. environmental, social and governance centric investing approach (ESG investing), sustainable development, fiduciary duty of loyalty and care, correlative duty of loyalty and care, casuistry theory