For nearly twenty years, climate advocates have argued that fiduciary duty obligations require pension fund managers and other fiduciaries to account for climate risk. Legal scholars and investor advocates have advanced the theory in law journals, industry guidance, and conferences like The Sabin Center’s New Climate Fiduciaries Colloquium. It will now be tested in court. Two recent lawsuits – one in the U.S. and one in Canada – put the theory squarely before judges for the first time.
The Canadian case, Hirji v. Canada Pension Plan Investment Board, filed in October 2025 in the Ontario Superior Court of Justice, was brought by four young pension fund contributors who allege that Canada’s national pension fund manager breached its statutory and fiduciary duties by mismanaging climate-related financial risk. In the U.S. case, Kvek v. Cushman & Wakefield U.S., Inc., filed in March 2026 in the Western District of Washington, a former employee alleges that Cushman breached its duties under the Employee Retirement Income Security Act (ERISA) by keeping a climate-exposed, underperforming fund as an investment option in its 401(k) menu.
Both cases start from the premise that climate risk is financial risk, and that a fiduciary who ignores climate risk is acting imprudently. But the cases take different approaches, and arise under different bodies of law: Kvek under a detailed U.S. federal statute, and Hirji under Canadian fiduciary jurisprudence that departs from U.S. interpretations in important ways. Each now faces substantive motions, either of which could produce the first meaningful judicial guidance as to whether, and how, fiduciary law requires investment managers to grapple with climate change.
Fiduciary Arguments to Consider Climate Risk have a Long History
The argument that fiduciaries may (or must) consider climate-related risk factors is not new. Freshfields’ 2005 report for the UN Environment Programme Finance Initiative concluded that integrating environmental, social, and governance (ESG) considerations into financial performance analysis is permissible, and arguably required. In 2021, a follow-on Freshfields report explored how investors may be expected to pursue sustainability outcomes themselves. In Canada, the Climate Law Initiative has commissioned a series of legal opinions on how fiduciaries duties apply to climate risk.
This work has been intensely contested. In particular, the anti-ESG movement has sought to frame climate risk analysis as a political choice, rather than a financial one. This argument gained traction in Spence v. American Airlines, when a Texas federal court found a breach of ERISA’s duty of loyalty based on ESG considerations in a 401(k) plan, before declining to award monetary damages. Meanwhile, the Department of Labor’s ERISA investment-duties rule has flipped with every recent administration, and another version of the “Prudence and Loyalty” rule is expected.
Part of the debate stems from treating “fiduciary duty” as a single standard. As explained in Varied Legal Parameters Shape Fiduciaries’ Ability to Act on Climate Risk, different legal regimes impose different combinations of duties (care, loyalty, prudence, impartiality, etc), and those obligations also have varying definitions and degrees of judicial deference. For climate risk, the duties of diversification and impartiality are arguably the most important, because they orient fiduciaries toward the performance of a portfolio overall, and toward fairness across different classes of beneficiaries. Still, even relatively restrictive regimes such as ERISA can require fiduciaries to consider systemic risks.
Despite the proliferation of scholarship, there has been little jurisprudence on the topic. Hirji and Kvek offer the first meaningful forums where a court may be called upon to apply these legal frameworks to the specific decisions of a particular fiduciary.
Kvek Asserts a Classic ERISA Claim
Kvek v. Cushman & Wakefield is a proposed class action filed against the company and its 401(k) investment committee. The complaint pleads three counts: (1) breaches of prudence and loyalty in selecting and monitoring the plan’s investments, (2) prohibited transactions, and (3) a failure to monitor other fiduciaries.
The case centers on a single investment option, the Westwood Quality SmallCap Fund. The complaint alleges that fund managers admittedly do not model or manage climate risk, and that the fund carries double its benchmark’s exposure to climate-vulnerable sectors. It pairs those climate allegations with familiar ERISA “red flags”: chronic underperformance against the Russell 3000 Index, fees above average for comparable funds, limited market adoption, and additional compensation to Fidelity, the plan’s trustee and recordkeeper.
The complaint pointedly contrasts Cushman & Wakefield’s public statements about climate change as a material financial risk to its own business with the company’s alleged failure to apply that insight to its employees’ retirement savings. Still, the legal theory is a traditional one. ERISA’s duty of prudence is a process standard: fiduciaries must act with the care of a prudent person “familiar with such matters,” and must monitor every option on a defined-contribution menu, removing imprudent options within a reasonable time. The complaint does not ask the court to prefer climate-friendly investments. Rather, it asks the court to treat a known, material financial risk as one that a prudent person should have examined. Kvek seeks restoration of plan losses, removal of the Westwood fund, and injunctive relief requiring the fiduciaries to consider climate-related financial risk going forward.
Hirji Demands a Broader Assessment of Climate Risk
The applicants in Hirji, all born after 1990, seek to establish a broader duty to manage climate risk across generations in their Notice of Application suing the Canada Pension Plan Investment Board (CPPIB). CPPIB is a Crown corporation that invests CPP contributions; it reported C$863.6 billion in net assets as of June 30, 2026.
CPPIB’s enabling statute is central to the applicants’ claims. Section 5 of the Canada Pension Plan Investment Board Act directs the CPPIB to manage its funds “in the best interests of the contributors and beneficiaries” and to invest “with a view to achieving a maximum rate of return, without undue risk of loss.” Section 6(2) bars activity inconsistent with those objectives, and section 35 requires investment policies that a person of ordinary prudence would exercise “in dealing with the property of others.” The applicants plead that these provisions, together with common-law fiduciary principles, impose duties of prudence, impartiality and even-handedness across generations, honesty, and disclosure.
The alleged breaches fall into three categories. First, the applicants plead inadequate risk assessment, because CPPIB relies on a climate risk model that omits tipping points and systemic financial risk, resulting in implausibly low projected losses. Second, they point out that CPPIB has continued to invest in fossil fuel expansion, increasing physical risk across the entire portfolio for CPPIB as a “universal owner” that cannot diversify away from systemic climate harms. And third, they argue that CPPIB has demonstrated ineffective risk management, having, for example, abandoned its net-zero commitment without explanation as to why that reversal serves its beneficiaries. The applicants seek declarations and a court order requiring various disclosures, but no damages.
Canadian Fiduciary Law Differs from U.S. Law
Observers accustomed to U.S. fiduciary law should be cautious about evaluating Hirji through an American lens. Canadian and U.S. fiduciary law share common-law roots, but they have diverged in ways that bear directly on the suit against CPPIB.
In Peoples Department Stores v. Wise (2004) and BCE Inc. v. 1976 Debentureholders (2008), the Supreme Court of Canada held that directors’ fiduciary duty runs to the corporation itself, is “not confined to short-term profit or share value,” and looks to the corporation’s long-term interests, which directors may assess by considering the interests of employees, creditors, governments, and the environment. By contrast, in the U.S., Delaware courts have tied directors’ duties more closely to stockholder value (e.g., eBay Domestic Holdings v. Newmark (Del. Ch. 2010)).
More importantly for Hirji, the Canadian test for whether a fiduciary relationship exists is framed around “best interests” language. Canadian courts ask whether the alleged fiduciary undertook to act in the best interests of beneficiaries who are vulnerable to its discretion, and whose legal or practical interests are at stake (Alberta v. Elder Advocates of Alberta Society (2011)). And Canadian courts have read statutory best-interests mandates in fiduciary terms. Notably, in Barker v. Barker (2022), the Ontario Court of Appeal held that a statutory imposition of responsibility constituted a fiduciary undertaking by the provincial government, rejecting the argument that the government’s broader public duties negated that relationship.
U.S. law approaches these issues differently. Private-sector retirement plans are governed by ERISA, which defines fiduciary status functionally by role, and specifies the governing duties: loyalty “for the exclusive purpose” of providing benefits, prudence, and diversification “so as to minimize the risk of large losses.” Public pension systems such as CalPERS fall outside of ERISA, and are subject to state constitutions, statutes, and trust law. In both, fiduciary status derives from statute or position. This contrasts with the case-by-case analysis that Canadian courts apply, which is now central to the Hirji motion.
Finally, the requirement in section 5 of the CPPIB Act that the CPPIB invest to maximum returns “without undue risk of loss” has no direct U.S. counterpart, and according to Ecojustice, no court has substantively interpreted that phrase. U.S. law speaks instead of balancing risk and return: the Uniform Prudent Investor Act asks whether a portfolio has “risk and return objectives reasonably suited” to the trust, and ERISA’s diversification duty targets “the risk of large losses.” Because the Canadian legislation is framed as a prohibition (“without”) rather than as a balancing test, the applicants can argue that it sets a stricter standard than familiar risk-adjusted-return formulations. Hirji could produce the first judicial guidance on that question.
The Novelty of the Kvek and Hirji Litigations
Just as the underlying law is different, so are the claims made in each case. Kvek is narrower, focusing on whether a fiduciary ran a prudent process for one investment. Hirji raises questions about whether an entire portfolio strategy is aligned with fiduciary duties owed across generations.
The tight focus of Kvek is presumably a strategic choice. It does not require a court to accept a particular theory of ownership or to pass judgment on fossil fuel investment. Rather, it invites the court simply to acknowledge that climate exposure is a financial risk within the purview of a prudent fiduciary. Hirji is more ambitious. That case asks the court to acknowledge that an investor’s own holdings can impact – and indeed, increase – the systemic risk faced by its overall portfolio. If a court is willing to reach such a conclusion, it will have broad implications for institutional investors.
The closest predecessor case is Kim Min et al. v. Kim Tae-Hyun et al., filed in February 2024 by members of South Korea’s National Pension Service. The plaintiffs alleged a breach of fiduciary duty for failing to implement the fund’s 2021 coal phase-out declaration. The Seoul Central District Court dismissed the claims in June 2025, finding the phase-out was a non-binding policy statement, and that executives retained broad investment discretion. Still, the court recognized an institutional duty to pursue responsible investment that considers ESG factors, and indicated that decisions made despite foreseeable climate losses to the fund could breach fiduciary duty.
Earlier cases implicating pensions and climate risk ended before any court reached the core question. In the U.S., Wong v. New York City Employees’ Retirement System, which advanced a challenge to fossil fuel divestment, was dismissed for lack of standing. Derivative actions in the U.K. also failed on largely procedural grounds. And in McVeigh v. Retail Employees Superannuation Trust, in Australia, a fiduciary claim settled in 2020 for various process and climate risk disclosure commitments.
Both Cases Face Pending Motions
The Hirji case is now before the Commercial List in Ontario, a specialized bench for complex business disputes.
CPPIB moved to strike the application on July 10. CPPIB asserts that the application is non-justiciable, and that the applicants lack standing, because their retirement contributions are paid to the federal government, not to CPPIB. Strikingly, CPPIB further argues that no fiduciary relationship exists at all, contending that the CPPIB Act creates only public-law obligations owed to the Canadian public, rather than to a defined class.
The applicants’ September 18 reply is anchored in evidence of legislative intent to establish CPPIB under a clear fiduciary mandate, and appellate decisions interpreting legislative language. They rely in particular on Professional Institute of the Public Service of Canada v. Canada (2012), which arguably recognizes a legislated fiduciary role in a nearly identical provision governing the federal public-service pension investment board. Applicants also point to recent complex climate cases that Canadian courts have held justiciable, including Mathur v. Ontario (2024).
The motion to strike will be heard on November 12 to 13, 2026.
The defendants in Kvek have also moved to dismiss, arguing in May 2026 that the plaintiff lacks standing because she does not allege that climate risk caused any underperformance; that she identifies no “meaningful benchmark” or process defect; and that ERISA does not require prioritizing any single factor.
The motion is fully briefed, but the case was transferred on July 23, 2026 to the Northern District of Illinois, where the plan is administered. That court has not yet ruled on the motion. However, the timing of the case intersects with a related matter, Anderson v. Intel Corp. Investment Policy Committee, where the Supreme Court will decide whether ERISA plaintiffs alleging underperformance must plead a “meaningful benchmark.” It heard argument on October 6, 2026, and a decision is expected by the end of the term.
How Courts May Assess the Merits of Hirji and Kvek
The motion to strike in Hirji favors the applicants procedurally, since Canadian courts are reluctant to dismiss novel claims at the pleading stage. Substantively, CPPIB’s threshold argument, that it owes no fiduciary duty at all, appears to run against the weight of Canadian authority. The statutory text helps the applicants: “best interests of the contributors and beneficiaries” tracks the test the Supreme Court has deemed the touchstone of a fiduciary relationship. The caselaw on which CPPIB relies, led by Elder Advocates, rests on the concern that a government must balance societal interests, and cannot owe undivided loyalty to one group. But CPPIB is differently situated: its enabling Act makes it a non-agent of the Crown, operating at arm’s length from government, with objectives defined by reference to contributors and beneficiaries. Indeed, CPPIB describes itself as managing the fund “in the best interest of” its over 22 million contributors and beneficiaries.
CPPIB’s remaining arguments, that a class of 22 million people is too large and diverse to be owed a duty of loyalty, and that statutory pension entitlements are not the kind of private interest fiduciary law protects, find some support in PIPSC, where the Canadian Supreme Court rejected a fiduciary claim to a federal pension surplus. But that decision turned on the absence of any governmental undertaking regarding the surplus. Canadian pension administrators, meanwhile, routinely owe fiduciary duties to memberships numbering in the hundreds of thousands. Against that body of law, CPPIB’s decision to contest the existence of any fiduciary duty, rather than the narrower question of what that duty requires with respect to climate risk, is conspicuous.
The impartiality theory is a distinctive feature in Hirji. Even-handedness among classes of beneficiaries is an established principle under trust law, one the Ontario Court of Appeal has applied in the pension context, and it has particular relevance given the structure of CPP: the CPP Act’s automatic adjustment provisions mean that, if investment returns fall short, the cost of higher contribution rates and lower benefits shifts to younger contributors.
Should the application proceed, the claims anchored by CPPIB’s disclosures may prove most easily justiciable. A reported loss estimate that is smaller in an extreme warming scenario than in a Paris-aligned transition suggests flawed modeling or a lack of expert judgment. The claim regarding fossil fuel expansion may prove harder. Hirji asks the court to find CPPIB’s fossil fuel investments imprudent (rather than merely debatable). Canadian courts, like their U.S. counterparts, generally defer to reasonable business judgment and focus on process rather than outcomes. But, as noted above, the “without undue risk of loss” standard may cut the other way.
Meanwhile, the obstacles to the Kvek suit are more typical to ERISA litigation. Standing is generally straightforward, since a participant whose account held an underperforming fund can usually establish a concrete loss. Still, traceability is a question: defendants argue that the losses must be tied to climate events, while the plaintiff argues that the injury flows from an imprudent process. As to the benchmark challenge, critics argue that comparing an active small-cap fund to the Russell 3000 and domestic equity fees is a mismatch, and Anderson v. Intel could raise the standard.
On the climate risk theory itself, opponents contend that the complaint infers a deficient process from the fund’s holdings. The complaint, however, also recites the managers’ own statements that they do not model or manage climate risk, and those allegations are specific to process, not just portfolio composition. A key question is whether plan fiduciaries were obligated to inquire about this. Cushman & Wakefield’s corporate climate expertise is rhetorically powerful, but ERISA’s objective prudent-fiduciary standard may diminish the import of the company’s own sophistication.
A court could resolve Kvek on fees and performance, without reaching climate risk, and thus avoid a finding that ERISA requires climate analysis. Still, any judicial acknowledgment that climate exposure is a legitimate financial risk factor would be significant in the current regulatory environment. Further, Kvek is framed entirely in pecuniary terms, meaning that its theory should remain available even under a new Department of Labor rule that confines fiduciaries to narrow financial factors.
Conclusion
The next several months will reveal whether courts are willing to engage these fiduciary theories on the merits. The consequences of an adverse ruling would differ between the cases. A holding that climate exposure is not cognizable under an ERISA prudence claim would be cited against climate advocates for years. A holding that CPPIB owes no fiduciary duty to contributors at all would reach well beyond climate, unsettling a basic premise of Canadian pension law and the governance model on which CPPIB was built.
However, a decision allowing either case to proceed would mark a tectonic shift in the climate-fiduciary debate. After twenty years of theory, fiduciaries would finally have to submit their models and assumptions to judicial scrutiny, and courts would begin to define what prudent climate risk management actually requires.
Cynthia Hanawalt is the Director of Climate and Business Law at the Sabin Center for Climate Change Law.
