Best Interests in the Long Term: Fiduciary Duties and ESG Integration

71 Pages Posted: 31 Mar 2018 Last revised: 19 Apr 2019

See all articles by Susan N. Gary

Susan N. Gary

University of Oregon - School of Law

Date Written: April 17, 2019


Two persistent misconceptions continue to affect the way fiduciaries think about sustainable investing: (1) fiduciary duties block a fiduciary investor from considering environmental and social factors and (2) if a fiduciary investor engages in sustainable or responsible investing, the portfolio will suffer financially. An examination of socially responsible investing, ESG integration (an investment process that involves consideration of material environmental, social and governance (ESG) factors together with traditional financial metrics), corporate social responsibility, and impact investing, shows that neither of these assumptions is correct. Analyses of different forms of sustainable investing have found no necessary cost to a portfolio when sustainable funds are compared with traditional funds. The SEC already requires companies to report material information, and reporting standards developed by the Sustainable Accounting Standards Board (SASB) and the Global Impact Investing Network (GIIN) are improving the understanding of the financial materiality of ESG factors.

Given the changes in finance, fiduciary duties also require examination. The duty to act as a prudent investor is of central importance, and the available data explains why a prudent investor should consider ESG information. Moreover, since the duty of impartiality protects future beneficiaries, that duty requires a long-term investment time horizon, increasing the need to take ESG factors into consideration. It follows that a prudent fiduciary investor not only may, but should, use ESG information in developing financial policy and decisions.

Keywords: Fiduciary Duties, ESG, Prudent Investor, Impact Investing, Impartiality, SRI, Social Responsibility, Sustainability, Endowments, Pensions

JEL Classification: G11

Suggested Citation

Gary, Susan N., Best Interests in the Long Term: Fiduciary Duties and ESG Integration (April 17, 2019). 90 University of Colorado Law Review 731 (2019), Available at SSRN: or

Susan N. Gary (Contact Author)

University of Oregon - School of Law ( email )

1515 Agate Street
Eugene, OR Oregon 97403
United States

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