Fiduciary Duty, Statute, and Pension Fund Governance: The Search for a Shared Conception of Sustainable Investment

Abstract

Fiduciary duty is the golden rule 'regulating' the relationship between trustees and beneficiaries. In principle, it regulates behaviour by pre-empting those actions that would harm the interests of beneficiaries while promoting duties of care consistent with the interests of those that stand to gain from well-intentioned and responsible decision-making. But, in many respects, fiduciary duty is a chimera: it looks to convention rather than forward to innovation in investment management. As such, governance policies and practice must provide the instruments that simple recipes of fiduciary duty are ill-equipped to provide. In this paper, I argue that the design and governance of investment management institutions is, actually, more important than honouring the principle fiduciary duty which, in the context of Anglo-American statute, is increasingly empty. In doing so, I re-read the classic cases that define the principle while identifying the problems which the golden rule has been unable to resolve. This is the back-drop for reconsidering the virtues or otherwise of a governance-focused regulatory regimes. In the penultimate section of the paper I focus on the mechanisms currently used to cultivate a regulatory regime that is at once long-term oriented and responsive to the climate change challenge that confronts humanity.