Resolution 5 Appendix:

Comparison of Traditional and Modern Fiduciary Duties

Traditional Fiduciary Duties   Page 12 (Box 2)

Fiduciary duties (or equivalent obligations) exist to ensure that those who manage other people’s money act in the interests of beneficiaries and do not serve their own interests. The most important of these duties are:

 Loyalty: Fiduciaries should act honestly and in good faith in the interests of their beneficiaries, should

impartially balance the conflicting interests of different beneficiaries, should avoid conflicts of interest and should not act for the benefit of themselves or a third party.

Prudence: Fiduciaries should act with due care, skill and diligence, investing as an ‘ordinary prudent person’ would.

Modern Fiduciary Duty         Page 21 (Box 5)

Fiduciary duties (or equivalent obligations) exist to ensure that those who manage other people’s money act in the interests of beneficiaries, rather than serving their own interests. The most important of these duties are:

Loyalty – Fiduciaries should:

  1. Act honestly and in good faith in the interests of their beneficiaries or their clients.
  2. Understand and incorporate into their decision-making the sustainability preferences of beneficiaries and/or clients, whether or not these preferences are financially material.
  3. Impartially balance the conflicting interests of different beneficiaries and clients.
  4. Avoid conflicts of interest.
  5. Not act for the benefit of themselves or third parties.

Prudence – Fiduciaries should act with due care, skill and diligence, investing as an ‘ordinary prudent person would. This includes:

  1. Incorporating financially material ESG factors into their investment decision-making, consistent with the timeframe of the obligation.
  2. Being an active owner, encouraging high standards of ESG performance in the companies or other entities in which they are invested.
  3. Supporting the stability and resilience of the financial system. 

Fiduciaries should disclose their investment approach to clients and/or beneficiaries, including information on how preferences are incorporated into the scheme’s investment strategy and the potential risks and benefits of doing so.