Fiduciary Duties: Varied Legal Parameters Shape Fiduciaries’ Ability to Act on Climate Risk

By Cynthia Hanawalt and Andy Fitch

Commentators who advocate either for or against corporate and asset managers addressing climate risks often refer to “fiduciary duty” as justification for their claims. Yet no field of corporate or asset management actually imposes one standalone fiduciary duty. Nor do any two business-law fields impose the same fiduciary regime. Instead, these fields adopt differing arrays of fiduciary duties to address various types of relationships, comprising a different blend of affirmative obligations and/or prohibitions, assessed with different degrees of strictness by enforcers and courts. As a result, overgeneralizations about fiduciaries’ duty in all business-law contexts tend to further obscure what a real-world fiduciary must, can, or cannot do in the face of today’s systemic climate risks.

This paper explores precisely where fiduciary law may require, permit, or prohibit corporate and investment decision-makers’ actions to address climate risk. The paper compares fiduciary regimes in five distinct legal contexts relevant to long-term U.S. economic development: corporate operations, contracted partnerships, employment-based retirement savings, a broader range of investment portfolios, and private trusts. It outlines these fiduciary roles by first tracing where a given fiduciary’s obligations originate, what that fiduciary controls, and on whose behalf the fiduciary exerts this control. It then fleshes out fiduciary roles along several axes, including which particular duties the fiduciary faces, what standard of review is applied, and how much autonomy exists to contract away from default parameters of the fiduciary relationship.

Overall, comparing these varied fiduciary regimes suggests that advocates of addressing systemic climate risk not only can counter restrictive formulations of “the fiduciary duty,” but also can leverage diversities within these siloed fields. Relatively permissive regimes (such as those operating under states’ corporate law and the federal Advisers Act, or through bespoke private-trust arrangements) provide fiduciaries with ample grounds for deploying emissions-mitigating efforts in the pursuit of beneficiaries’ best interests. Relatively restrictive regimes, particularly those with diversification and/or impartiality obligations (such as those operating under ERISA and default private-trust law), can ultimately require all of their fiduciaries to consider systemic risks.

Read the report, Varied Legal Parameters Shape Fiduciaries’ Ability To Act On Climate Risk, in Columbia Law School’s Scholarship Archive.