In Law360, Litigation Team Provides Insight into the Anti-ESG Movement

Across the country, Republican state officials have asserted that ESG investing amounts to an improper breach of fiduciary duties owed by asset managers to their clients.

In an article written for Law360, litigation & enforcement partners Amy Roy and Rob Skinner examine the assertions of “woke capitalism” in Republican fiduciary duty arguments, noting they will prove difficult to support.

“The core premise of the states' fiduciary duty theory is that any consideration of ESG factors by an asset manager in selecting investments or voting proxies is necessarily intended to further the manager's social or political agenda rather than to maximize portfolio returns — contrary to the manager's duties to act prudently and in the sole interest of its investor clients,” said the authors.

“But this premise is false,” Amy and Rob noted. “Asset managers across the industry incorporate consideration of ESG factors into their investment selection and proxy voting decisions for the express purpose of maximizing portfolio returns.”

“In the face of these challenges, an emerging judicial recognition of the link between ESG considerations and financial returns should provide useful support to asset managers in pressing back on the flawed premise underlying any future assertions of fiduciary breaches,” Amy and Rob concluded.