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Socially Responsible Investment and Fiduciary Duties of Mutual Funds

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Corporate Governance in Banking and Investor Protection

Part of the book series: CSR, Sustainability, Ethics & Governance ((CSEG))

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Abstract

In the investment context, the fiduciary duties are traditionally interpreted as ensuring the highest return on investment with the lowest possible risk for the beneficiaries. However, in the past two decades it became visible, that many beneficiaries of mutual funds demonstrated that they put a certain value on investment outcomes other than financial performance (those non-financial impacts include mainly environmental and social outcomes). This behaviour challenges canonically defined fiduciary duties for investments in instances when meeting the non-financial goals correlates negatively with the return. Consequently, it calls for the reinterpretation of the fiduciary duties of mutual funds and for finding appropriate tools for managing such extended obligations. In this chapter, we aim at building a rationale for an individual investor’s extended utility function that depends on return, risk and—additionally—non-financial characteristics of the investment. We also aim at establishing a stronger link between institutional and individual investment decisions through identifying the best practices adopted by mutual funds with respect to incorporating environmental, social and governance criteria in their investment decisions. In this way we contribute to improving fiduciary duties fulfilment in the modern pooled investment sector.

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Authors and Affiliations

  1. University of Economics in Katowice, Katowice, Poland

    Anna Doś & Monika Foltyn-Zarychta

Authors
  1. Anna Doś
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  2. Monika Foltyn-Zarychta
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Correspondence to Anna Doś .

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Editors and Affiliations

  1. Department of Business Administration, University of Cantabria, Santander, Spain

    Belén Díaz Díaz

  2. Guildhall Faculty of Business and Law, London Metropolitan University, London, United Kingdom

    Samuel O. Idowu

  3. College of Business Administration, University of Sharjah, Sharjah, United Arab Emirates

    Philip Molyneux

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Doś, A., Foltyn-Zarychta, M. (2018). Socially Responsible Investment and Fiduciary Duties of Mutual Funds. In: Díaz Díaz, B., Idowu, S., Molyneux, P. (eds) Corporate Governance in Banking and Investor Protection. CSR, Sustainability, Ethics & Governance. Springer, Cham. https://doi.org/10.1007/978-3-319-70007-6_15

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