Community Conversation Summary • March 17, 2026
Chatham House Rules (speaker attributed with permission)

Overview

As a part of IEN's Fiduciary Duty for Climate Justice Initiative, we are sharing recaps of Chatham House rules conversations and presentations without attribution. You can learn more this initiative by joining our email list, becoming an IEN Member, and staying up to date on our upcoming events.

This conversation centered on the evolution of fiduciary duty in institutional investing, with particular focus on how systems-level thinking can — and should — inform what it means to be a prudent investor today. The discussion drew on perspectives from legal, institutional investment, and mission-aligned investing communities.

Key themes from the presentation

The session opened with a framing of the three core fiduciary duties and how each connects to long-term, systems-aware investing:

Systems-level investing: the core argument

When Modern Portfolio Theory was developed, institutional investors held approximately 8% of the equity market. By 2017, that figure had grown to roughly 78%. At that scale, portfolio returns are more exposed to system-wide (beta) risk than to the performance of any individual holding — some research suggests upward of 80% of returns derive from beta, not alpha. This changes the calculus for what "diversification" means and what a prudent investor should care about.

Systems-level investors consider the long-term absolute returns and risks created by the overall health of environmental, social, and financial systems — not just the risk-adjusted alpha of individual portfolios. A portfolio invested in capital markets is exposed to system-level risk, whether or not it explicitly accounts for it.

A participant raised the empirical dimension: if it were more widely understood that the vast majority of returns come from beta, it would strengthen the principle that institutional investors have a responsibility not to harm the systems their portfolios depend on.

What does a prudent investor do?

• Adapts to changes in knowledge and investment strategies over time
• Balances short-term and long-term thinking
• Considers market-level risk exposure and works to create financial value by minimizing system-level risks
• Engages with external systems (environmental, social, regulatory)
• Avoids uncompensated transfers of risk to future students, beneficiaries, or participants

Discussion highlights

On making the legal case

Participants noted that the legal pathway for shifting fiduciary norms is diffuse — the Restatement of Trusts establishes that legal standards must be general and flexible, but concepts are tested over time, not in immediate cases. One suggestion was to engage more directly with lawyers who advise financial professionals. Resources mentioned included the National Association of Public Pension Attorneys and Morgan Lewis, a law firm active on ESG and regulatory trends. The Council of Institutional Investors was also raised as an important venue for advancing these norms.

On investment policy statements (IPS)

Several participants are actively revising their IPS to incorporate ESG approaches and a systems-level lens. San Francisco State University shared their revised IPS as an example, noting it has generated significant peer interest. The Shareholder Commons has also published a system stewardship IPS template.

On proxy voting and stewardship

Participants from one foundation discussed their evolving approach to proxy voting, which draws on and amplifies the stewardship work of organizations like Majority Action. Their three-pillar framework for system-level investing was noted as a model others are watching.

On training and certification

A question was raised about whether any organizations offer training or certification in systems-level investing. The Investment Integration Project (TIIP) was mentioned as one entity offering this, and their handbook on system-level investing was shared.

On regulation and internalization of costs

Participants observed that regulatory pressure is increasingly forcing businesses to internalize costs they previously externalized (e.g., climate risk). A prudent investor should be anticipating and adapting to this shift — not waiting for it to affect portfolio valuations after the fact.

On mission-aligned investment transitions

One foundation shared their experience transitioning public equity holdings to an ESG-aligned manager, citing both mission alignment and fiduciary rationale. Another shared their experience taking a public stance on workers' rights as an expression of fiduciary duty and mission alignment.

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Resources shared