By Dr Mark Hinnells, director of Susenco Consulting Ltd
Fiduciary duty is when one person has an obligation in law to act in the best interests of another. It has usually been seen as financial and relatively short term.Currently the fiduciary duties of various actors – including cabinet ministers, fund or investment managers and company directors – are defined in different places in different ways, in a combination of law, policy and guidance, some of which is litigable and some is not.
Increasingly, a longer time frame is being applied to fiduciary duty. As the impacts and costs of climate change are better understood, the risk to assets, investments, companies, financial systems and ultimately GDP becomes ever more obvious.
The Paris Agreement 2015 committed to returning global greenhouse gas emissions to net zero by mid-century to mitigate the worst effects of climate change. Such a target requires co-ordinated action across the global economy. Surely then, a joined-up approach to fiduciary responsibility is now necessary, connecting the legal and ethical obligations of, for example, cabinet ministers, fund managers and corporate directors. Is this for government to work out, or for courts to point out?
The hierarchy of fiduciary duty
Cabinet ministers don’t have fiduciary duties in the same way that company directors or pension trustees do, but courts and constitutional practice in Westminster-style systems treat their responsibilities as fiduciary in nature. Ministers also obviously have political constraints and a duty to follow the law.
The testing of whether ministers have complied with law has become more common in the UK. For example, Friends of the Earth v Secretary of State for BEIS (2022) successfully challenged the UK’s net zero strategy for failing to meet obligations laid out in the UK Climate Change Act 2008 (as amended). Judgements challenging ministers may become more common in other jurisdictions, following the ICJ Advisory Opinion on ‘Obligations of States in Respect of Climate Change’ July 2025 and the Inter-American Court of Human Rights (Advisory Opinion 32) July 2025.
Those who invest on other people’s behalf – fund managers for pensions, life insurance and other investment products – have a fiduciary duty to beneficiaries. In the UK climate change is now on the face of pensions legislation (Pensions Schemes Act 2021, s124). The climate and ESG component of fiduciary duty continues to be tested in court – Butler-Sloss v Charity Commission (2022), McGaughey & Davies v Universities Superannuation Scheme Ltd (2023) and in the US Wong v New York City Employees Retirement System.
In Canada currently, four young people whose pensions mature after 2050 have taken the Canada Pension Plan Investment Board (CPP Investments) to court, claiming CPP is breaching its duty to invest in their best interests by failing to protect their pensions from climate risk. This case raises a further layer of conflict in that fiduciary duty to younger people may be different from those about to retire, since the longer a pension has to run, the more exposed to climate risk it is.
At the corporate level, company directors’ duties vary by jurisdiction, but alongside a fiduciary duty some jurisdictions, such as Hong Kong, include a range of duties onto which climate risk can be mapped. For example, a duty of care, including a reasonable degree of skill, care and attention to major issues like climate risk; a duty to invest prudently, implying risk management and foresight; a duty to keep accounts and records including, where required, reporting and evidence of consideration of ESG and climate issues; a duty to inform and consult on major risks and opportunities like climate; and a duty to take professional advice as climate is unlikely to be a specialism of trustees. All this said, the commercial courts are currently reluctant to interfere with how directors discharge their duties as in ClientEarth v Shell plc 2023.
A new approach
Siloed fiduciary duties are thus insufficient, where international agreements like the Paris Agreement on achieving net zero carbon by mid-century is clear, as is the ICJ Advisory Opinion on ‘Obligations of States in Respect of Climate Change’. There is a clear need for a cascading fiduciary duty, from states to cabinet ministers, to fund managers and company directors. Alignment needs transparency, long-termism, climate literacy and accountability.
In the meantime, there is a need for advice, arbitration and, if necessary, litigation to test the obligations of those with a fiduciary duty in respect of climate and ESG. Susenco would be happy to assist.
- For more on climate change, ESG and fiduciary duty, see the other blogs by Dr Mark Hinnells in this journal and the seminar given by Dr Mark Hinnells for Hong Kong Trustees Association. More information is at www.susenco.com.