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Law Commission Report on Fiduciary Duties of Investment Intermediaries

3 July 2014

The Law Commission has published its final report on its investigation into how fiduciary duties apply to those working in financial markets, and to clarify how far those who invest on behalf of others may take account of factors such as social and environmental impact and ethical standards, with particular emphasis on pensions.

It concluded that pension trustees should consider factors which are financially material to the performance of an investment and, where ethical or environmental, social or governance (ESG) issues are thought to be financially material, they should also be taken into account.

Whilst acknowledging that the pursuit of a financial return should be the predominant concern of trustees, the Commission regards the law as sufficiently flexible to allow subordinate concerns to be considered. The law permits trustees to make investment decisions based on non-financial factors, provided that:

  • they have good reason to think that scheme members share the concern; and
  • there is no risk of significant financial detriment to the fund.

A copy of the full and summary reports can be downloaded from the Law Commission website.


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