Do the Fiduciary Duties of Pension Funds Hinder Socially Responsible Investment?

Banking and Finance Law Review, Forthcoming

57 Pages Posted: 20 Mar 2007  

Benjamin J. Richardson

University of Tasmania - Faculty of Law

Abstract

In recent years, pension funds and other institutional investors have begun to give more attention to the environmental and social behaviour of the companies in which they invest. A recent movement for socially responsible investment (SRI) seeks to exclude companies that pollute or ignore human rights, for example, and to champion those that behave ethically and responsibly. However, some confusion among investment decision makers persists about the extent to which their fiduciary duties to beneficiaries allow policies that may sacrifice financial returns for environmental or other philanthropic causes. This is compounded by the belief that they cannot secure the best returns in respect of their fiduciary obligations with current socially responsible companies. With reference to the main common law jurisdictions, this article critically examines whether the fiduciary duties of pension fund investors hinder SRI. Contrary to some commonly held beliefs, SRI can often sit comfortably with fiduciary duties to invest prudently. However, legal reforms to improve the climate for SRI would help, as evident by some recent initiatives in several jurisdictions.

Keywords: Pension funds, socially responsible investment, environmental law, fiduciary responsibilities

JEL Classification: K20, K32, G2, O16

Suggested Citation

Richardson, Benjamin J., Do the Fiduciary Duties of Pension Funds Hinder Socially Responsible Investment?. Banking and Finance Law Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=970236

Benjamin J. Richardson (Contact Author)

University of Tasmania - Faculty of Law ( email )

Private Bag 89
Hobart, Tasmania 7001
Australia

HOME PAGE: http://www.utas.edu.au/law

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