Across the financial sector, fiduciary duty is most often defined narrowly as a responsibility to maximize financial returns. But as growing economic, racial, gender, and climate inequities destabilize communities and markets alike, this traditional interpretation is facing serious scrutiny.
A more expansive and forward-looking view is emerging—one that recognizes how ignoring social and environmental costs introduces significant long-term risks to both portfolios and society. The effects of climate change is where this has been discussed the most. In its Financial Stability Report (FSR) released, the US Federal Reserve has recognized climate change as a “significant financial stability risk”. The Network of Central Banks and Supervisors for Greening the Financial System, established in 2017 and composed of 114 central banks and financial supervisors, has emphasized on multiple occasions climate change will result in significant disruption to society and the economy. In this view, fiduciary responsibility must account for not just profits, but the structural forces that threaten the well-being of beneficiaries and the long-term viability of financial systems.
I recently had a discussion about this topic with Julianne Zimmerman, Co-CEO at Adasina Social Capital and in particular how the topic of diversity, equity and inclusion are essential to consider as part of companies’ fiduciary duties.
Julianne argues powerfully that diversity, equity, and inclusion are not optional add-ons to responsible investing—they are essential fiduciary concerns. As she explains, unpriced externalities tied to racial and gender injustice, economic exclusion, and environmental degradation impose real and escalating costs. “We believe there is more than ample evidence that advancing racial, gender, economic, and climate justice leads to improved corporate innovation and top and bottom-line performance, as well as more stable, more prosperous communities and nations,” Zimmerman notes.
She described how Adasina works at the intersection of social justice and financial systems, striving to make those externalities visible and actionable for investors. A key part of their approach is partnering with grassroots organizations and publishing datasets that illuminate hidden risks; beyond incorporating the data in their own products, the firm empowers investors to act in alignment with a broader conception of fiduciary duty—one that includes the long-term well-being of people, communities, and the planet. Their campaigns have mobilized hundreds of investors in campaigns representing more than $1.3T in assets around key issues—from eliminating the subminimum wage to ending forced arbitration in sexual harassment cases—signaling that more stakeholders are recognizing the materiality of justice.
This is not a matter of choosing values over value; it’s a recognition that long-term financial health is inseparable from systemic social health. As Zimmerman argues, there is no fiduciary calculus that can justify poisoning a community’s water supply or ignoring widespread exclusion from economic opportunity. These are not abstract moral concerns—they are foreseeable, material risks to human and market stability.
Rather than prescribing one-size-fits-all solutions, Adasina’s approach is collaborative and data-driven. It invites investors to see how their strategies intersect with broader justice concerns and to take action appropriate to their own mandates. As markets confront intersecting crises of inequality and climate instability, this kind of informed, systemic perspective may not just be prudent—it may be indispensable.
Read more about Adasina’s approach to fiduciary duty in the interview below.
Christopher Marquis: Adisina’s work focuses on racial, gender, economic, and climate justice. How do you respond to traditional investors who might claim these considerations fall outside the scope of their fiduciary duty?
Julianne Zimmerman: At Adasina we believe that the winner-take-all model has been catastrophic for most people and communities, and has concentrated wealth and power to a very tiny few. Further, we believe that there is ample evidence that racial, gender, economic, and climate justice externalities carry unpriced risks and costs that investors have the right — and some have the fiduciary duty — to take into account.
We try to communicate plainly and directly about the materiality of these social justice concerns, the ways in which unpriced social justice externalities sow harm for everyone, and how we believe that transforming finance to advance social justice creates the conditions for a healthier, safer, more just, more resilient, and more prosperous future for all.
Personally, I find the premise that expensive unpriced externalities are somehow outside the scope of fiduciary duty to be disingenuous at best.
I believe we have more than ample evidence that advancing racial, gender, economic, and climate justice leads to more robust corporate performance, and more stable, more prosperous communities and nations. I believe we also have more than ample evidence that unpriced racial, gender, economic, and climate externalities produce sharp disruptions — not to mention avoidable human suffering — in the short term and suboptimal market performance in the long term. In total, I believe that not taking these material social justice considerations into account results in a status quo that is unnecessarily risky, volatile, and extractive.
Specifically regarding fiduciary duty, I personally don’t know how anyone can justify defining fiduciary duty as making “strictly pecuniary” decisions that ignore readily foreseeable negative ramifications for the beneficiary’s health, wellbeing, economic stability, life expectancy, or other dimensions of life — or organizational viability, in the case of institutions rather than human persons.
The definition of a fiduciary is clear: the person with fiduciary responsibility is obligated to act in the best interest of the beneficiary. Certainly, it is easier to only count dollar signs, but making the fiduciary’s job easier doesn’t enter into the duty of care for the beneficiary’s best interest.
One of the ways I sometimes talk about this is that there is no amount of money that would be sufficient to compensate a person or community for irreparable poisoning of the local water supply. And yet we have multiple examples of poisoned water supplies.
Intellectually, I accept that there are those parties who want to obfuscate these commonsense considerations for their own self-interest, but I find it perplexing that there could be any grounds for debate whether investors should value any dimensions of their assets beyond (particularly short-term) financial returns.
Marquis: Can you outline how Adasina is working to help others see the importance of this broader perspective on fiduciary duty?
Zimmerman: We educate and mobilize our fellow investors to take informed action, using the tools of finance to improve corporate performance and raise market standards.
We educate by publishing datasets and sharing other information that highlights the costs, risks, and opportunities associated with material social justice concerns that are not well disclosed, tracked, or priced in the market.
We also mobilize investors around specific issues by articulating why those issues are in investors’ interests, and inviting investors to take whatever actions are appropriate to their strategies. Those actions may include, for example, shareholder advocacy, divestment or exclusion, public advocacy, and further research.
Adasina doesn’t purport to do this work alone. Just the opposite: we believe that investors’ power lies in collectively protecting our ability to serve our beneficiaries, whether those beneficiaries are our family members or our clients.
We believe that by sharing material data that makes the costs and risks of “externalities” less opaque, we help other investors exercise their rights and fiduciary duties, and improve the market for all.
For example, we currently have two investor mobilization campaigns, Ending the Subminimum Wage and Ending Extractive Agriculture. Both highlight ways in which certain corporate practices exploit missing risk and cost information — or disinformation — in the market to extract value to the detriment of investors and their beneficiaries. To date those two campaigns have attracted signatories representing over $1.25T in assets. That level of participation signals to us first that investors see the materiality of those issues in particular and greater transparency in general; and second they value their prerogative to make their own informed decisions and take associated actions to safeguard the value of their portfolios from hidden costs and risks.
We previously led an investor mobilization campaign to End Forced Arbitration for Sexual Harassment. Informed by social justice partners #MeToo, #ForcetheIssue, and others, we issued an investor statement that was signed by investors representing $54B in assets who recognized that the issue was material to their interests as investors. One of the outcomes of the campaign was 396 companies voluntarily discontinued the practice; another was a new law making forced arbitration for sexual harassment illegal in the United States.
In each of our campaigns, we identify specific social justice investment concerns; other investors sign onto those campaigns because they recognize the materiality of those concerns, and they take actions they consider appropriate to address those concerns. Unlike those who want to dictate what investors can and cannot evaluate, we don’t force anyone to agree with our assessment, and we don’t prescribe what actions they may take if they do.
Marquis: How do you determine what these broader interests are among your diverse sets of stakeholders and investors? And do the areas of focus change over time?
Zimmerman: At Adasina we don’t dictate what people should care about, or how they should manage their investments. We take in the guidance of our social justice partners and translate those insights into social justice investing criteria, in terms that investors can use. We apply those social justice investing criteria in our products, we share datasets for other investors to use, we provide investor education content, and we lead investor mobilization campaigns which signatories join because they see their own interests at stake. I believe that one of the main reasons our campaigns gain such traction is because we don’t attempt to dominate or control our peers: we invite signatories to take action appropriate to their strategies, as they see fit, and they do just that.
Investors are not a monolithic group, and just like any other population or professional segment, investors are people who hold an assortment of priorities that can be congruent, conflicting, or divergent, and often all three at once. Moreover, whenever there is turbulence, priorities and behaviors shift. So yes, I am observing shifts occurring in real time, and I believe we will continue to see shifts in investor behaviors and priorities not only in response to political disruption and uncertainty but also in response to the effects of climate change, generational wealth transfer, and other systemic, institutional, and personal stimuli.
To the extent there is good news to be had in this moment, I believe the good news for investors is that turbulence offers potential for positive change: as familiar norms are destroyed and previously stable systems are destabilized, the instability and demolition also create the opportunity to elevate market standards and raise performance expectations. We don’t have to passively accept whatever happens, or what we are told to ignore. We can exercise our rights and our power as investors — and again, some hold a fiduciary responsibility — to create better outcomes that encompass financial returns as well as the economic, social, and environmental conditions in which those financial returns have real value.
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