Climate fiduciaries: part II – the duty of even-handedness

In 2018, 23-year old Mark McVeigh took Rest — an Australian superannuation fund — to court. Mark’s concerns had to do with insufficient climate risk disclosures and by extension, Rest’s breach of fiduciary duty to invest in his interest as a young member.

By the time Mark turned 30, his precedent would reignite. In 2025, four young Canadians — Aliya Hirji, Travis Olson, Rav Singh and Chloe Tse filed a case against the Canada Pension Plan Investment Board (CPPIB) for breaches of fiduciary duty linked to fossil fuel investments.

In so doing, they asked a legal question few had investigated before: if climate change disproportionately impacts younger members, does that imply CPPIB has a fiduciary duty to make climate-aware investment decisions?

The second instalment of this series explores the significance of their query and a vital fine print of fiduciary rules: the duty of even-handedness.

Even-handedness

There is something to be said about the age at which Mark, Aliya, Travis, Rav and Chloe did what they did. All five will retire after 2050, when most if not all net zero targets would have matured. In many ways, the world they inherit will be invested in today.

That sets them apart from members who might retire sooner. For their pension providers and their climate investment plans, this distinction is noteworthy.

Pension funds invest the savings of members across a variety of age groups. As fiduciaries, they have an obligation to act impartially and equitably in the interests of different generations. This, in legalese, is the duty of even-handedness.

“The principle of even-handedness requires intergenerational equity. Even-handedness is inherent in the definition of sustainability as ‘meeting the needs of the present without comprising the ability of future generations to meet their own needs’”, explains Maurtis Dolmans, a senior counsel at Cleary Gottlieb Steen and Hamilton LLP speaking in his individual capacity.

As a core tenet of fiduciary duty rules, even-handedness provides a direct channel to connect climate solutions investments, or the lack thereof, with fiduciary duty.

Canadian precedent

Even though fiduciary duty is even-handed, climate change is anything but. Effects of unmanaged climate risks are both severe and non-linear.

Karine Péloffy, a lawyer representing the young Canadians in the CPPIB suit says this creates a range of obligations for the fund — including the consideration of factors beyond just short-term returns.

“These factors include climate-related financial risks such as the financial risks that stem from tipping points, cascading risks, and systemic risks, which are most likely to manifest and intensify in the medium and long-term future, disproportionately impacting young contributors”, Péloffy says, citing the notice of application.

“CPPIB must avoid favouring or disadvantaging one class over another without proper justification; must ensure that its decision-making processes balance allocation of capital between near-term needs and future wealth creation; and must consider the potential transfer of risk between the various generations of CPP beneficiaries”, she told Net Zero Investor.

The allegation that CPPIB breached its duty of even-handedness is based on its investments in fossil fuel expansion. These investments, the argument goes, ignore the effect of fossil fuel expansion on accelerating global warming – the financial consequences of which the four young members will inherit.

The on-going case against CPPIB is significant for that reason. It is the world’s first attempt at figuring out whether the duty of even-handedness creates an obligation for pension funds to make climate-aware investment decisions.

As far as the future trajectory of climate fiduciary duty goes, the Canadian example could set a transformative precedent, closely tracked by members and trustees alike.

This much is clear. The law binds pension funds to a duty of even-handedness. Trustees striving to uphold that principle must confront an Orwellian tension — all members might be equal, but unmanaged climate risks imply some are more equal than others.