Fiduciary duties

Paige Morrow, JD, LLM

Head of Brussels Operations, Frank BoldVisiting Lecturer, University of Kent Brussels School of International Studies

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Fiduciary Duties - Paige Morrow

EU Commission study on fiduciary duties

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‘Resource Efficiency and Fiduciary Duties of Investors: Final Report’ (2015) produced by Ernst & Young for DG Environment (ENV.F.1/ETU/2014/0002) available at http://ec.europa.eu/environment/enveco/resource_efficiency/pdf/FiduciaryDuties.pdf

Conclusion - pension trustees are always allowed (but not required except in certain special situations) to take account of ESG factors where they consider them pertinent to the best interests of members.

Fiduciary Duties - Paige Morrow

DG ENVI Study Key recommendations

National financial authorities with support from the European Commission should provide official guidance and interpretation of fiduciary duties and the extent to which institutional investors may or must include ESG issues in their investment strategies and decisions.

This should take the form of a reference document which makes clear that taking account of ESG risks is compatible with, and even required by, fiduciary duty.

Mandatory disclosure of responsible investment policies by all institutional investors, including if they do not have such a policy in place (i.e. 'comply or explain' basis).

Monitor and verify institutional investors using sustainable and responsible investment policies.

Encourage institutional investors to inform and consult with beneficiaries to determine their 'best interests', especially on environmental and social issues.

Require institutional investors to measure the environmental and social impacts of their investments.

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Shareholder Rights Directive

Current revision proposes to require institutional investors to adopt & disclose engagement policy

Policy to include monitoring invest companies to reduce environmental and social risks, and to disclose its implementation and results

Comply or explain basis

Current status: in trilogue negotiations between the Commission, Parliament and Council

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Policy options

Clarification at EU and/or Member State level regarding scope of discretion available to pension fund trustees

E.g. recommendation from Commission to clarify minimum expectations across EU and definitively settle question of ESG matters & fiduciary duties

Readjust asset managers’ mandates/benchmarks to integrate ESG criteria

Introduce claw-back clauses for asset managers

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www.frankbold.org

paige.morrow@frankbold.orgtel. +32 28 93 10 63

Learn about the Purpose of the Corporation Projectwww.purposeofcorporation.org@purposeofcorp