Corporate Social Responsibility Issue
(Re-)Interpreting Fiduciary Duty to Justify Socially Responsible Investment for Pension Funds?
Article first published online: 30 MAY 2013
© 2013 John Wiley & Sons Ltd
Corporate Governance: An International Review
Special Issue: Corporate Social Responsibility, Institutional Structures and Corporate Governance
Volume 21, Issue 5, pages 436–446, September 2013
How to Cite
Sandberg, J. (2013), (Re-)Interpreting Fiduciary Duty to Justify Socially Responsible Investment for Pension Funds?. Corporate Governance: An International Review, 21: 436–446. doi: 10.1111/corg.12028
- Issue published online: 4 AUG 2013
- Article first published online: 30 MAY 2013
- Swedish Foundation for Strategic Environmental Research (Mistra)
- Corporate Governance;
- Institutional Shareholder;
- Legal Origins and Control;
- Ownership Mechanisms;
- Pension Fund Ownership
A critical issue for the future growth of socially responsible investment (SRI) is to what extent institutional investors such as pension funds can be persuaded to engage in it. This paper considers attempts at justifying such engagement stemming from a range of (re-)interpretations of the fiduciary duties owed by pension funds to their beneficiaries, and thereby develops a hypothesis concerning the most effective political or legal remedy.
Previous commentary suggests that fiduciary duty either already mandates SRI for pension funds, or at least can be made to do so rather easily. In contrast with this, however, this paper finds that none of the considered interpretations is able to justify engagement on social and environmental issues across the board. Indeed, the problem to some extent seems rooted in the very concept of fiduciary duty.
The paper is relevant to current attempts at justifying SRI through reinterpretations of fiduciary duty, provided mainly by legal scholars and practitioners. By addressing the more philosophical issue of how far the concept of fiduciary duty can be “stretched” to accommodate SRI (a project of conceptual rather than legal clarification), it provides an evaluation of the contemporary debate which is independent of squabbles about existing law.
The paper shows that there are conceptual limits to attempts at redefining fiduciary duty. But this does not mean that pension funds' engagement in SRI is unjustified or unjustifiable more generally. A more promising way to legally mandate SRI may be through what is dubbed independent social and environmental obligations.