The Evolving Concept of the Fiduciary
Fiduciary responsibility outlines the duty of a person or provider to give the highest standard of care to a beneficiary or principle (Temchenko 2016). A fiduciary is commonly seen in a financial context as loyalty to a client to serve their best interest, avoiding conflict of interests.
It has been argued that fiduciary responsibility goes beyond financial factors. Within both the sustainability and finance community, as noted at the WBCSD Conference, there is a push to expand fiduciary responsibility to include relevant ESG (economic, social and governance) factors when consulting about investment decisions. This argument can be made through both a sustainability and financial lens. Financially, ESG factors carry latent risk for investors that could impact financial capital (return). Through a sustainability lens, investing in companies with good ESG factors will ultimately lead to more capital towards environmentally friendly companies.
Though, it must be acknowledged that universal ESG factor information is not yet readily available. As noted at the WBCSD conference, though many company’s report through GRI standards, it is still voluntary. Non-universality makes it hard for investors to compare company’s ESG factors on a company-to-company basis. However, there has been a push to make SASB, another ESG reporting standard, part of SEC filings. This would make ESG reporting universal in the US market. These differing narratives illustrate how fragmented the ESG reporting industry currently is.
Even without universal reporting, it is important that advisors consider ESG factors as part of their fiduciary responsibility. These factors carry risk for their investor and thus impact return. Accounting for these factors will not only have a positive impact on financial returns, but also lead to more capital for corporations that seek a triple bottom line. In essence, considering ESG factors is good for investors and the environment.
Temchenko, Eugene. “Fiduciary Duty”. Legal Information Institute. N.p., 2016. Web. 1 Apr. 2017.