Challenging Fiduciary Duty

The dominant view in the private wealth industry is that trustees have a fiduciary duty to act in the beneficiaries’ best interest by maximising the trust’s assets. As a result, trustees and their advisors focus on the accumulation of wealth and increase in returns when considering the suitability of investments held within the trust fund. There is very little to no consideration of non-financial factors such as equality, resource depletion, climate change and ecological degradation.  At the Good Ancestor Movement we support beneficiaries with trust interests who care deeply about the assets they are benefiting from. They are conscious of the harm being done on their behalf to communities and the planet in the pursuit of profit. Yet, the trustees and their advisors continue to rely on the dominant interpretation of fiduciary duty to avoid making changes to investment strategies.  Ultimately this means that the vast majority of investments held by trustees in private trusts will be supporting the extractive economy. This narrow interpretation of fiduciary duty inhibits change within the private wealth industry as it acts as a scaffold for traditional portfolio management, which does not delve into assessing an organisations non-financial impact. It also supports traditional fee charging structures, which are based on the limitless accumulation of wealth.  We hope that by challenging the traditional interpretation of fiduciary duty the private wealth sector will be forced to acknowledge, review and adapt its advisory strategies.

We seek to instruct a barrister to produce formal legal advice (i.e. Counsel’s opinion), which analyses what it means to act in a beneficiaries’ best interest. What factors should be considered when trustees exercise their fiduciary duty to act in the beneficiaries’ best interest? Some of the questions we would like Counsel to explore are: - What would be the route of challenge that is most likely to be successful?  - What does it mean for a trustee to act in the best interest of the trust's beneficiaries when it comes to investments?  - Is maximising profit at the expense of people and the planet in the beneficiaries’ best interest? Is there a requirement for long-term thinking which will result in planetary resources and climate change being necessary factors in decision-making?. - Trustees cannot take into account their own moral objections when investing, but should they take into account their beneficiaries’ moral objections? Can they be acting in a beneficiaries’ best interest if say that beneficiary has strong moral views on fossil fuel, but the trust fund continues to invest in fossil fuel leaving the beneficiary in a position where their income is generated from assets they morally object to because of the trustees’ inability to act in their best interest? - What action should the trustee take if the beneficiaries of the trust have different values or attitudes to investments?  We believe that Counsel’s opinion will point towards the need for a more holistic interpretation of fiduciary duty, which takes into account the impact of investments on communities and the planet both in the short and long term. If so, we intend to make Counsel’s opinion publicly available. This will encourage public discourse, generate support for a more holistic approach to fiduciary duty and push for legislative change from regulators and government agencies. Counsel’s opinion should also provide us with the best strategy to pursue in terms of challenging the current interpretation of fiduciary duty in the court system. Ultimately we hope that by making counsel’s opinion public we will be in a position to identify one or more beneficiaries who are willing to engage in bringing a test case to obtain directions from the court as to the true meaning of fiduciary duty.  Recent case law in the charitable context indicates the courts’ willingness to clarify the meaning of fiduciary duty and allow trustees of charitable trusts to invest in line with their charitable trust’s purpose (e.g. Butler-Sloss). Our project seeks to extend this legal interpretation to all fiduciaries. We believe this will have a significant impact on investment strategies, investment  products, tax and legal advice as well as director decision making.

In challenging the current interpretation of fiduciary duty using legal tools, we hope to directly impact the investment strategy and long term management of private trusts in the UK.  Similarly, this would result in the advisory industry having to pivot towards a system that no longer focuses on  profit above all else. We hope that investment tools and strategies which centre justice, community and the more-than-human-world. This in turn should lead to the further development and support for investments that support the just transition. We also hope that changing the interpretation of fiduciary duty in the context of private trusts will open doors for other similar challenges. For instance, in the context of pension trustees or directors.