Introduction

Helene Winch, Director of Policy and Research, PRI

Defining fiduciary duty is straightforward – a legal duty for one party to act in the interests of another party – but interpreting what that means in practice can be highly subjective. From an investment perspective, the interpretation of fiduciary duty has become more difficult over time as the financial markets have become more complex, yet the demand for high standards of fiduciary care has become ever more important as increasing numbers of employees and pension plan beneficiaries are reliant on their trustees to provide for their future financial security.

Implementation of fiduciary duty varies between countries and jurisdictions, but increasingly governments are recognising the need for clarity on investment obligations and risk management as well as issues such as ethics, transparency, and sustainable development. Some are actively examining whether reform is required, such as the UK’s Law Commission currently on-going review of the fiduciary duties of investment intermediaries, The PRI seeks to play an active role in supporting these initiatives, since the impact of a well-defined framework for fiduciary duty extends beyond the fulfilment of financial commitments to beneficiaries, to greater confidence and trust in the investment industry and better functioning global financial markets.

The papers summarised within explore the history and future development of the concept of fiduciary duty, from global and country-specific perspectives. The authors examine the evolution of standards of governance in institutional investment and propose new ways of thinking to promote greater emphasis on long-term returns and sustainable financial markets. All of the papers are published in the Cambridge Handbook of Institutional Investment and Fiduciary Duty.