Charles E. Rounds Jr., of Suffolk University Law School, has made available for download his article, “Good luck to the trustee who would endeavor to forge beneficiary-consensus as to ESG Investing objectives”, published in JDSUPRA. The abstract is as follows:
Social investing (SRI/ESG Investing) of assets subject to an irrevocable trust implicates the trustee’s duty of undivided loyalty unless the terms of the trust expressly direct/authorize the trustee to engage in such activity. It is no wonder that default fiduciary social investing has been practiced almost exclusively in the charitable space. To the extent that there are adverse economic consequences to the estate of a charitable trust that are attributable to a particular social-investing program, it is likely that the attorney general of the state in which the trust is principally being administered is either too busy frying other fish to get involved or actually supportive politically of the virtues that are being signaled by the social-investing trustee. In either case, the trustee is likely to have nothing to fear economically from his politically driven maladministration of the charity’s assets.
Social investing assets held in irrevocable private trusts for “widows and orphans” whose terms lack express direction to engage in such activity, however, is quite another matter. After all, the beneficiaries and their surrogates in the first instance would have the requisite standing to sue the trustee personally for any economic loss to the entrusted portfolio that is attributable to the social investing.
Posted by Marin Larkin, Associate Editor, Wealth Strategies Journal.