Public debate about investor fiduciary duties over the past few years has become polarized and inaccurate. Commentators often ignore established fiduciary-duty principles and fail to recognize nuances of the duties they do address.  As a result, many public fund fiduciaries and their advisers have been left with inconsistent legal narratives for guidance. This Swiss cheese approach to understanding fiduciary duty presents a danger for the prudent management of assets held in trust for workers, government entities, and other savers.

While state attorneys general on both sides of the debate have weighed in on how to interpret fiduciary duties, they have also missed established principles regarding application of investor fiduciary duties. Those overlooked duties and how they relate to evolving investment risk-management practices are material to providing public fund fiduciaries advised by the attorneys general with accurate advice.

Nevertheless, opposing sides in the legal debates may have more in common than they think. For instance, both agree that political views and personal biases cannot form the basis of fiduciary decision making. Even the federal court in the Spence v American Airlines case (which is often invoked by one side of the debate) identified this fiduciary duty common ground:

Investing that aims to reduce material risks or increase return for the exclusive purpose of obtaining a financial benefit is not ESG investing. Consideration of material risk-and-return factors is no different than the standard investing process when both are focused on financial ends. [Emphasis added.]

More recently, on April 7, 2026, the Oklahoma Supreme Court in Keenan v. Russ found that the Oklahoma Energy Discrimination Elimination Act, which imposed a list of prohibited investments on the state’s pension funds, was unconstitutional. The court concluded that the act conflicted with traditional investor standards of fiduciary responsibility, which were included in the state Constitution. As a result, laws in about two-thirds of the states, which have prohibited investment list statutes in place (addressing both liberal and conservative views), could be affected by the Keenan decision.

In addition, there is growing bipartisan recognition of the dangers associated with recent legislative efforts to eliminate the discretion that fiduciaries require in order to select investments to meet fund liability streams and fit portfolio risk/return structures within the context of current circumstances. For example, 10 Republican members of Congress recently signed a letter “calling on House leadership to defend free market principles and protect the freedom to invest from increasing political interference in private markets.”

We start with these observations to illustrate how the debate has generated heat when what investor fiduciaries desperately need is up-to-date guidance grounded in a neutral application of the full range of fiduciary duty principles.

Fiduciary Duties Missing in Action During the Culture Wars

The missing-in-action aspects of fiduciary duty that are essential for accurate legal advice include:

• Fiduciary Duty Differences: Asset owners, as governing fund fiduciaries, have a different fiduciary role than investment managers, who may only have delegated responsibility for a portion of the fund’s assets and be assigned a shorter time horizon. Governing fiduciaries have a broader set of fund investment strategy, policy, service provider selection, reporting and oversight fiduciary duties. Yet, recent commentaries tend to view fiduciary duties only from the perspective of the investment manager and fail to recognize the additional total fund management responsibilities of governing fiduciaries. But asset owners cannot divest themselves of their remaining governance obligations by outsourcing portfolio management to investment managers. We focus on the asset owner perspective.
• Adapting to Change: The factual context and knowledge base that inform application of the prudent standard of care evolve over time. Fiduciaries must adapt policies and practices to changes in knowledge, risk exposures, and other “circumstances then prevailing” that can influence decisions about current or ongoing investment performance. Fiduciaries cannot ignore how rapidly changing markets, new risk exposures, and knowledge-base expansion affect the environment in which investment decisions must be made. For instance, fiduciaries cannot remain blind to learning about improvements in investment management strategies being adopted by peers.
• Investigation of Relevant Facts: The fiduciary duty of prudence also contemplates use of forward-looking processes and requires fiduciaries to investigate all facts that are relevant to investment success over applicable fund liability time horizons. Fiduciaries should not jump to conclusions or base decisions on personal preferences, whether they be conservative or liberal. This duty also includes developing an understanding of changes and trends that influence evolving investment practices, including system-level risk management practices, which are further discussed below.
• Duty of Impartiality: The duty of loyalty includes an impartiality mandate that requires application of good faith efforts to fairly balance management of fund beneficiaries’ differing financial interests. This includes alignment of investment practices with generational variations in investment time horizons and risk tolerance levels. For example, the duty of impartiality prohibits pension fiduciaries with short- and long-horizon liabilities from unreasonably favoring maximization of short-term returns at the expense of long-term risk management and sustainable value creation to build value for future obligations. The investor duty is also consistent with Delaware corporate law, which imposes a similar long-term value creation fiduciary obligation on corporate directors.

Application of these missing fiduciary duty principles is fundamental for an accurate up-to-date legal analysis of investor fiduciary practices. In particular, a fully informed understanding of fiduciary duties and application of current knowledge to evolving 21^st century risk exposures should encourage forward-looking fiduciaries to evaluate emerging system-level investment practices for risk management and performance improvement opportunities that are relevant to their funds.

Adaptation to Evolving Circumstances

Change is constant, and dramatic changes have occurred over the past few decades that influence both companies’ and investors’ success. This is illustrated by the World Economic Forum’s 2026 Global Risks Report, which has identified a number of systemic threats with economic consequences in its 2026 list of top 10 long-term risk exposures. They include:

• Extreme weather events
• Biodiversity loss and ecosystem collapse
• Critical change in earth systems
• Adverse outcomes of AI technologies
• Natural resource shortages
• Misinformation and disinformation
• Inequality
• Pollution

Fiduciaries have a duty to take the relevant short- and long-term economic impacts of these evolving risk exposures into account when exercising their investment management responsibilities.

Evolution Toward System-Level Investing

Investor exposure to the systemic effects of these risks has driven development of new insights and changes in investment practices. The growth of system-level investment practices has been among the most important. 

System-level risk management is not the same as ESG.  It is focused on financial risks and opportunities that are part of general market exposure (also known as “beta”). Beta can be influenced (for better or for worse) by investors and is responsible for the great majority of overall fund performance. In fact,  more than 75 percent of investment returns have been found to be driven by general market exposure(beta) rather than by capturing above market returns (also known as “alpha”).

Unfortunately, system-level risks cannot be avoided through diversification of fund assets because they have impacts across asset classes and sectors. As a result, use of system-level risk-management practices may be the only practical option for managing a fund’s exposure to beta risks. Attention to system-level opportunities can also lead to improved investment performance. Both of these financial benefits have generated investment practices and learning opportunities that merit consideration by investor fiduciaries.

We are now seeing adoption by a growing number of large investors of fund management practices aimed at reducing system-level risk exposures and capturing the upside of system-level risk solutions. The overarching theme for these system-level investors is recognition that the overwhelming proportion of their returns are being driven by the interdependence between capital markets and the broader system-level context in which they function.

The effectiveness of system-level investment practices has been demonstrated by their impact, which is estimated by Lukomnik and Hawley in Moving Beyond Modern Portfolio Theory to already have added $2–5 trillion in global wealth to the public capital markets. As a result, consideration of these peer practice developments is highly relevant to application of the fiduciary duty of prudence.

The Role of State Attorneys General

State attorneys general of all political stripes have spoken about investor fiduciary duties, but they have not yet fully addressed the above oversights.  This has resulted in faulty legal guidance that is causing confusion and may be misleading fiduciaries responsible for management of trillions in trust fund assets. For public pension funds alone, prudent management of nearly $7 trillion is at stake.

Attorneys general are positioned to provide up-to-date legal guidance for public investment fiduciaries by issuing unbiased and fact-based legal opinions that apply the whole range of established fiduciary duty principles. Recognition of the principles highlighted in this post is essential to providing investor fiduciaries with the ability to identify and adapt to rapidly changing 21^st century financial-risk exposures and to achieve balanced short- and long-term investment success that impartially meets their obligations to multiple generations of fund beneficiaries. Updated legal advice encouraging exploration and consideration of system-level risk management practices to address fund beta risk exposures, which drive more than 75 percent of fund returns, is also necessary.

As a result, we believe that State attorneys general should update previous fiduciary advice to provide accurate and unbiased guidance on consideration of currently evolving short- and long-term risk exposures and investment opportunity insights with application of the full range of established fiduciary duty process principles. Indeed, they may even have a legal ethics obligation to do so.

Keith Johnson is a director of the Externality Investment Research Network, a retired shareholder of the law firm of Reinhart Boerner Van Deuren s.c., and former State of Wisconsin Investment Board chief legal counsel. Susan Gary is professor emerita at the University of Oregon Law School. Maurits Dolmans is senior counsel at Cleary Gottlieb Steen & Hamilton in London, and the views expressed in this post are his and not necessarily those of the firm.  The post is based on their recent article, “State Attorneys General must Correct Investor Fiduciary Duty Guidance,” available here, and The Handbook of System-Level Investing, available here.