Nine Questions Pension Fund Fiduciaries Should Ask Their Lawyer
1. Do the fiduciary duties of loyalty and impartiality require that I consider and manage climate-related risks irrespective of my personal beliefs regarding climate change?
2. Given the long time horizon over which climate impacts are expected to occur and the relative unpredictability of those impacts, could climate change trigger my fiduciary duties more or differently than traditional risk/return variables?
3. With respect to climate change, what new factors should I consider when making investment decisions to satisfy my duty of inquiry?
4. As an asset owner with exposure to all sectors and several asset classes, do I need to consider and manage the impacts that certain investments are likely to have on my portfolio as a whole?
5. Would it be prudent to modify plan documents, including investment mandates, to consider and manage climate-related risks?
6. Does the duty to diversify prevent negative screening or divestment from investments whose returns may not justify their risks?
7. Could incentive structures that favor short-term returns present conflict of interest issues?
8. With the uncertainty and dynamism of the climate change trajectories, how do I fulfill my fiduciary duties? Do climate-related risks require particular attention to the duty to monitor?
9. Could I be sued for breach of fiduciary duties if I don’t consider and manage climate-related risks and the fund underperforms the market? On the other hand, what if I do thoughtfully consider climate-related risks and act to manage those risks, and the fund underperforms the market?