The European Commission Action Plan: An assessment of the reform areas for PRI signatories provides an overview of the main areas of reforms. Action 7 focuses on clarifying institutional investors’ and asset managers’ duties.

Key points

  • Subject to the outcome of its impact assessment, the Commission will table a legislative proposal to clarify institutional investors’ and asset managers’ duties in relation to sustainability considerations by mid-2018.
  • The proposal will aim to (i) explicitly require institutional investors and asset managers to integrate sustainability considerations in the investment decision-making process and (ii) increase transparency towards end-investors on how they integrate such sustainability factors in their investment decisions, in particular as concerns their exposure to sustainability risks.


Action on investor duties was recommended by the HLEG, with the Commission already having consulted on the subject in 2017. Clarifying investor duties is a major priority for the PRI as part of our Fiduciary Duty in the 21st Century project4.

The Commission’s regulatory objective is to clarify investors’ duties “to make sure they consider, in an appropriate manner, environmental, social and governance (ESG) issues in their investment decision process and are more transparent towards their clients”.

The action plan does not set out the details of the proposed legislation. The HLEG recommended an EU omnibus proposal. This would amend multiple EU directives to: incorporate financially material ESG factors; link investor duties to the investment horizon of the individual or institution they serve; and ensure investment institutions understand and consider the preferences on sustainability of members, clients and beneficiaries. The HLEG identified a number of key legal acts which will need to be revised5, so that expected adjustments across the investment chain and at all stages of the investment process are clear for everyone involved.

Clarified duties would encompass key investment activities, including investment strategy, risk management, asset allocation, governance and stewardship. Making it clear that sustainability factors must be incorporated in these activities would ensure that the clarified duty is effective. The clarified duty would also require not only participants in the investment chain to proactively seek to understand the sustainability interests and preferences of their clients, members or beneficiaries (as applicable), but also provide clear disclosure of the effects, including the potential risks and benefits, of incorporating them into investment mandates and strategies.

This new approach would supplement but not over-rule the fundamental duties of investors. Rather, it is intended to clarify and complement the existing obligations of investors in a way that aligns them with sustainability objectives.

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