Since March 2021, the market has been eagerly awaiting guidance from the US Department of Labor (DOL) on the use of ESG in managing retirement-plan assets and in voting the proxies of investments held by those plans. On October 14th, the DOL released proposed rules1 that espouse the view that “climate change and other ESG factors are often material and that in many instances fiduciaries should … consider [such] factors in the assessment of investment risks and returns.” While these rules are still in the proposed stage, they demonstrate the current administration’s view that ESG factors often can be a critical component in assessing potential investments.
1 News release: US Department of Labor Proposes Rule to Remove Barriers to Considering Environmental, Social, and Governance Factors in Plan Management, October 14, 2021. See also "Notice of Proposed Rulemaking on Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights" factsheet published October 13, 2021.
2 DOL, Executive Order 13990, Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis, EBSA, 86 Fed. Reg. 7037 (January 25, 2021).
3 DOL, Statement Regarding Enforcement of its Final Rules on ESG Investments and Proxy Voting by Employee Benefit Plans (March 10, 2021).
4 White House, Executive Order on Climate-Related Financial Risk (May 20, 2021)
5 DOL, Interpretive Bulletin Relating to the Fiduciary Standard under ERISA in Considering Economically Targeted Investments, EBSA, 29 CFR Part 2509, RIN 1210-AB73 (10/26/15).
Important Risks: Investing involves risk, including the possible loss of principal.
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