POSTED: August 13, 2017

Tuesday, 3 October 2017

A sustainable economy and a cohesive society: do we need to change financial institutions’ fiduciary duty to achieve this?

A roundtable for businesses
Organised by An Economy that Works and CUSP, hosted by Aviva

CC-BY-SA 2.0 :: Chris Brown / Flickr

The topic

The need for the investment industry to help produce a sustainable economy and a cohesive society is well understood and much discussed. There have been some successes, but as yet these are exceptions that prove the rule: our environmental and social problems remain as acute as ever. Is a more radical approach needed?

Part of such an approach could be to clarify or refine financial institutions’ fiduciary duty, that is the responsibilities they owe to their beneficiaries and clients. This might happen at three levels.

First, although the UK law is now quite clear that this is not the case, fiduciary duty is still sometimes misinterpreted as requiring a focus purely on the short-term.

Second, the law as it stands means that fiduciaries can neglect environmental and social factors that might have an impact on long term returns if paying attention to them could reduce short term returns – unless specifically mandated otherwise.

Third, fiduciaries must neglect any wider material interest beneficiaries have if paying attention to them could reduce portfolio returns, again unless specifically mandated otherwise. This wider interest might also be affected by the state of the economy, the stability of society and whether or not we are able to mitigate and adapt to environmental threats such as climate change.

At which of these levels is change needed to make a significant different to investment behaviour? What are the problems and barriers and how can these be overcome? What kind of actions are now needed? What if any supporting regulatory reform is needed to make this effective? Can the same framework be adopted for jurisdictions using civil law and jurisdictions using common law?

Format and subsequent action

The issues will be introduced with a series of very short (3 minute) statements from panellists, including Steve Waygood of Aviva, David Rouch of Freshfields, David Pitt-Watson and representatives of UNPRI and Client Earth. There will then be an hour’s discussion of the issues. The final 20 minutes will focus on next steps: what kind of intellectual and research input is needed? what kind of support within the industry? what co-ordination with other initiatives? what can those round the table do? what mechanism should we adopt to ensure that the process is sustained?

One immediate action will be to feed the conclusions of the meeting into the work of the EU High Level Expert Group on Sustainable Finance (which has very recently published an interim report recommending establishing “a single set of principles of fiduciary duty” see:


The roundtable discussion is organised by the Centre for the Understanding of Sustainable Prosperity and hosted by Aviva. For enquiries, please email

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