Defending ESG Fiduciary Duty
Katherine Held
Southern Illinois University
Keywords: ESG, Fiduciary Duty, Investment Advisers Act, Dodd Frank, ERISA
Abstract
This paper defends the validity of ESG Investing (Environmental, Social, Governance Investing) as an advisor’s fiduciary responsibility. The financial industry is increasingly including ESG considerations when calculating the intrinsic value of a stock. In opposition to this valuation trend, nineteen state attorney generals (the Nineteen) have attacked ESG, challenging its legality by claiming that it violates state and federal law and the fiduciary responsibilities that hold investment advisors accountable to their clients. After identifying key elements of fiduciary responsibility that are being ignored by the Nineteen’s position, several key and relevant United States statutes are reviewed and applied to their argument. In doing so, it becomes evident that the Nineteen do not have the best interest of investors in mind, not only because they violate key fiduciary elements, but also because their position would prevent investors the opportunity to benefit from higher yielding Return on Equity portfolios.
