Abstract
This article assesses the fiduciary law context governing socially responsible investing (SRI) in retail funds in order to understand the scope for promoting sustainable development. Most scholarship on this subject has focused on institutional investors such as pension plans, yet the legal, institutional and market context of retail funds has some distinct characteristics. The article argues that although the retail sector offers the most generous legal space for SRI of any financial sector, SRI practice is far from mainstream owing to a range of organizational and economic impediments coupled with the drawbacks of a relatively permissive legal milieu. This article highlights that the obsessive focus on the supposed fiduciary law barrier to SRI can overlook other institutional obstacles to its practice, as well as to stress that it is insufficient merely to have a legally enabling framework if we wish SRI to make a more fundamental contribution to sustainability. Furthermore, any analysis of the fiduciary responsibility of retail funds is incomplete without taking into account the impact of other legal standards and duties in this sector such as from contract law and financial regulation.
Notes
Accusations by Investors Against Genocide: http://www.investorsagainstgenocide.org
Under US law, see Investment Company Act, 1940, 15 USC, s. 80A-13.
Letter from Deputy Assistant Secretary of Labor, Alan Lebowitz to Helmuth Fandl, Avon Products Inc., reprinted in Pensions Reporter (BNA) 15, 29 February 1988, 391.
X v. A. 2000. 1 All ER 490. 496.
UK's Occupational Pension Schemes (Investment) Regulations, 2005: cl. 2(3)(b)(vi)-(3)(c); and see also France's Projet de loi sur l'épargne salariale, 7 February 2001, No. 2001-152, arts 21, 23.
Corporations Act, 2001 (Cth), s. 1013D(1)(l).
Directive 2003/71/EC, OJ L. 345/64, 31 December 2003.
Ordinance no. 2011-915, 1 August 2011, art. L. 523-22-1; Monetary and Financial Code, art. L. 214-12.
Art. L. 114-17 Mutual Insurance Code; Art. L. 322-26-2-2 Insurance Code.
1976, 426 US 438.
Ibid., 449.
Daly v. Sydney Stock Exchange, (1986) 160 CLR 371, 385.
SEC v. Capital Gains Research Bureau, Inc., (1963) 375 US 180, 191-2.
Dodd–Frank Wall Street Reform and Consumer Protection Act, 2010, Pub. L. No. 111-203, s. 913(g).
Banbury v. Bank of Montreal, [1918] AC 626.
[1932] AC 562.
Hedley Byrne v. Heller & Partners Ltd, (1963) 2 All ER 575.
Lloyd Cheyham and Co. Ltd v. Eversheds, (1985) 2 Lloyds PN 154.
Notably, Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6EEC.
German Supreme Court, 6 July 1993, BGHZ 123, 126.
[2011] US 564.