The rise of fiduciary capitalism in developing countries

Abstract

Fiduciary capitalism is an important issue which involves how institutional investors are legally obliged to a duty of care, loyalty and honesty, and are required to put their beneficiaries’ interests ahead of other considerations. This chapter examines the emergence of fiduciary capitalism and looks at fiduciary duties, including the duty of care, the duty of loyalty, and the duty of honesty and disclosure. The chapter examines whether fiduciary duty is a hindrance to Sustainable and Responsible Investment (SRI) and discusses the new definition of fiduciary duty. The main impediment to SRI is said to be market forces rather than the legislation itself. It is the duty of fiduciaries to think about the environmental, social and economic implications of their actions to investors, society and beneficiaries as a whole. Thus, as shareholders and stakeholders, everyone is a universal owner. This new definition must therefore take into consideration how environmental, social and governance (ESG) variables influence both risks and opportunities, and fiduciaries should be aware of the legal impacts of their actions. Large institutional investors, including pension funds, mutual funds, endowments, sovereign wealth funds, and insurance companies, are commonly recognised as universal owners.