Are my views really beyond the pail?*

27 AUG 2025

@alexblock

*I know this is a misspelling but buckets make for more interesting pictures than fences

Sometimes it seems difficult to state the obvious

It’s a strange experience to hear two other people talk about what you think without being there to express yourself directly. In this discussion between Jason Mitchell and Maurits Dolmans I feel that my views on climate and fiduciary duty could be misinterpreted by listeners as being that asset owners are somehow in breach of fiduciary duty if they consider the systematic risks of climate change. Nothing could be further from the truth.

The paper they are discussing - Sustainable Fiduciary Duties, written for the Net Zero Lawyers Alliance -  is well worth reading to understand the arguments for a more expansive interpretation of fiduciary duty. I actually agree with most of the high level fiduciary duty framing, although differ on the implications for investor climate action.

In my paper, Universal Owners and Climate Change, which they also discuss, I conclude that from a fiduciary duty perspective it is perfectly reasonable for long-term asset owners to want more rather than less climate action compared with the trajectory we are currently on, largely based on the kind of portfolio-level reasoning Dolmans outlines . However, I also highlight that, from where we are today, it’s far from obvious that the radical action required to hit the target of 1.5C with limited or no overshoot - which underpinned a number of financial sector alliances before they predictably started unravelling - would deliver the best economic and financial market outcomes for developed markets. And so this goal is far more difficult to justify on a financial best interests basis for developed country beneficiaries.

Any such case has to place a high weight on the (highly uncertain) risk of tipping points and is not self-evident from the studies that are out there (including the Rebonato study, which I like, but which for the moment remains an unpublished working paper, and on which Dolmans seems to place a lot of weight). If you cherry pick the most extreme studies you can of course get any result you want, which we have also seen on the climate-denial side of the debate. But my case is that a balanced view of the evidence demands that asset owners think very carefully about the nature of any over-arching climate goal they adopt and how that aligns with fiduciary duty. And, yes, as of today, I think 1.5C with limited or no overshoot is a hard case to make given what would be required to hit it. But this doesn’t mean that I think investors do not have an interest in addressing climate change at all.

The second point I make in my paper is that any sensible framing of a target needs to have regard to the agency the investor has to achieve it. Even if collective action problems could be overcome, investors would not be all powerful in their ability to stop climate change and in practice have relatively limited agency. Adopting goals that you don’t have the agency to meet may make you feel better as an asset owner, but generally it’s better to think through carefully where and how you can have influence and calibrate your efforts accordingly. Soldiers in the Charge of the Light Brigade probably felt good about themselves for about 50 metres at which point they must have regretted their superiors’ lack of realism. And fiduciaries looking to exert influence on climate outcomes must also stress test their strategies in the event that they are not successful, which again influences which types of activity are most aligned with fiduciary duty. This isn’t denial of the importance of climate change - it’s a common sense interpretation of fiduciary duty.

Ironically, at the end of it all, out of Dolmans’ list of five recommended principles, four appeared in my own earlier paper (in his language: Include Climate Risks in ROI Assessments; Pursue Viable Impact Investments; Active Sustainability Stewardship; Sustainable Regulatory Advocacy). The only one I leave out is with-holding investment from new fossil fuel investments, as while I don’t particularly object to asset owners adopting that stance, equally I doubt it will achieve much given the depth, breadth, and fungibility of capital markets. It’s certainly the case that my tone is more cautious about what investors can realistically achieve and for sure I’m less pessimistic (more deluded?) about the economic effects of climate change at warming levels of up to 2C or a bit more, which informs my view on the appropriate framing of investor climate goals. I also believe that the uncertainties about climate science and the efficacy of investor action create a zone of reasonableness where different asset owners will come to different views about the extent and type of action they feel it appropriate to take.

At the end of it all, what seems to offend some people most about my work is that I suggest that there could be some doubt about whether ripping fossil fuels out of the economy at the pace required to hit 1.5C with limited or no overshoot is actually a beneficial thing to do from an economic and financial markets point of view in developed markets. Even worse, I hold the view that there may be some trade-offs between financial returns and climate action, even over the long-term. Yet whilst holding these views may cause me to fail a moral purity test in the eyes of some, to me it seems blindingly obvious and I don’t have any internal strife in holding these views while caring a lot about climate change as an issue.

If these are views that can’t be expressed without censure in polite society then we’ve really lost the plot.

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