The Fiduciary’s Divestment Dilemma: ESG and the Age of Climate Change

31 October, 2023


In this article, Richard Hoyle considers a range of recent English cases which examine fiduciary duties relating to investment or divestment where fiduciaries were either motivated by, or, in contrast, downplayed ESG and climate change issues. In doing so he highlights the potential for fragmented outcomes when comparing different types of fiduciary relationship, including charitable trustees, pension trustees and directors, noting that for the time being, courts appear to be deferential to the approach which different fiduciaries choose to adopt to ESG and climate change issues.

Richard observes that this stance leaves open several questions for the future, including whether the courts have been too deferential when assessing breach of duty out of a desire to protect fiduciaries when they are acting reasonably, whether climate risk should receive additional weight in fiduciary decision making due to the dire consequences of (collective) inaction, and, if the courts are reticent to act under existing common law and equitable principles, whether Parliament should intervene to impose more stringent outcome-based requirements, in addition to the current trend towards regulation which requires more in-depth climate risk reporting.

This article first appeared in the October 2023 issue of Butterworths Journal of International Banking and Financial Law and is reproduced with thanks to the editors.