Cynthia Hanawelt, director of climate and business law at the Sabin Center for Climate Change Law.
The idea of fiduciary duty is used by investment managers as a justification for both action and inaction on mitigating climate risk, according to a new US report, which says the concept is notoriously slippery and can be defined in a narrow or expansive way depending on the industry or legal framework.
“Fiduciary duties are not monolithic … there’s a huge range in the type of obligations that fiduciaries owe their beneficiaries,” said Cynthia Hanawalt, director of climate and business law at the Sabin Center for Climate Change Law at Columbia University.
Hanawalt is co-author of a white paper exploring where fiduciary law may require, permit or prohibit actions to address climate risk by corporate and investment decision-makers.
“The law assigns different duties to different fiduciaries and then it even defines the same duty in different ways,” she said. “There is a lot of fear of getting it wrong or misinterpreting what the obligations are. That makes fiduciaries cautious.”
Fiduciary duty is increasingly being cited across the world as a potential way to encourage pension funds and asset managers to take climate risk more seriously. While there has been a US backlash against the concept following the recent political swing, Australia is leading the way in integrating sustainability factors into trustees’ fiduciary duty and there is a heated debate on the topic in the UK.
Hanawalt said the US report is designed as a road map for where the law is more accommodating to climate risk analysis.
The paper outlines how fiduciaries have to consider different duties when deciding whether they can take action on climate risk, across different fields of law. Those duties include care, loyalty, impartiality, obedience, disclosure, prudence and asset diversification.
The report notes that asset managers operating under the US Employee Retirement Income Security Act (Erisa) are arguably prohibited from pursuing third-party interests, which means they can’t adopt investment strategies that mitigate emissions unless they are justified through risk-return financial analysis.
However, asset managers operating under the Investment Advisers Act are allowed a broader range of investment considerations, so long as the adviser does not subordinate a client’s interests to those of the adviser, or of other clients.
Hanawalt noted that duties on corporate fiduciaries can be quite different from obligations for investment advisors.
A Delaware court last year dismissed a stockholder lawsuit against social media giant Meta, rejecting the claim that directors’ fiduciary duties extend to the corporation and its stockholders as diversified equity investors.
However, Hanawalt said a similar claim might be upheld against an asset manager operating under the Advisors Act.
“You could imagine a similar case brought into different context against the BlackRocks of the world that could be successful because there’s a different obligation for asset managers than for corporate fiduciaries,” she said.
“Asset managers may have the legal permission to mitigate climate risk at the instruction of their asset owners.”
The report said advocates of addressing climate risk can counter restrictive formulations of fiduciary duty and leverage diversities within these fields.
For example, even though Erisa seems restrictive, it does impose an obligation on asset managers to diversify their portfolios.
“That seems to me to be the best sort of legal framework under which you can advocate for systemic risk mitigation,” Hanawalt said. “Risk managers have to build a portfolio that mimics the market at large and their portfolios are inherently more vulnerable to systemic risks like climate change and therefore they might have an affirmative obligation to mitigate that risk.”
Meanwhile, parties to a trust have more room for manoeuvre. States such as Delaware permit a trust fiduciary’s pursuit of “the beneficiaries’ personal values, including the beneficiaries’ desire to engage in sustainable investing strategies”. The “duty of impartiality” under trust law could also be called upon relating to intergenerational conflicts from climate change.
“That is the most fertile ground to advocate for how fiduciaries manage long term costs of systemic climate risk because they have an obligation not just to retirees now but to retirees coming up 30 years from now,” Hanawalt said.
This page was last updated October 16, 2025
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Emma Thomasson is a British journalist, consultant and trainer based in Berlin. She is an expert in economics, politics, business and technology. She previously worked for Reuters as a correspondent and bureau chief in Germany, Switzerland, the Netherlands, South Africa and the UK.
