ESG Investment Advice & Fiduciary ‘Best Interest’ Standard
Current understanding
Federal proposals would redefine the fiduciary ‘best interest’ standard for brokers, dealers, and investment advisers to require primacy of pecuniary (financial return/risk) factors, effectively limiting the use of environmental, social, and governance (ESG) considerations — including climate-related factors — in investment advice unless the customer expressly directs otherwise. The ESG Act of 2025 is the current legislative vehicle for this change. Practical effect would be to reduce the extent to which climate risk and environmental factors are incorporated into retail investment recommendations absent explicit client instruction.
Evidence log
- 2025-03-26 — ESG Act of 2025: cross-connection with sec-climate-related-disclosures: Both actions constrain how climate/ESG information flows through securities markets — SEC rescission removes issuer-side climate disclosure obligations while the ESG Act constrains adviser-side use of ESG factors in retail investment recommendations. (novelty: 3)