TheCorporateCounsel.net

October 18, 2021

DOL Proposes Rule Allowing ERISA Fiduciaries to Consider ESG Factors

Last week, the Department of Labor released a proposed rule that would amend the DOL’s investment duties regulation with respect to the consideration of ESG factors in the selection of investments for retirement plans that are subject to the ERISA. The proposal also would amend the proxy voting rules under ERISA. As this Sidley memo notes:

The Proposal represents a significant change from the prior administration’s fiduciary rule relating to ESG investing, which is now subject to a nonenforcement policy by the DOL.” The current rule requires that plan fiduciaries consider only “pecuniary factors” in making investment decisions, and does not reference anything regarding ESG factors. The new DOL proposal would remove the concept of “pecuniary factors” and states that “a prudent fiduciary may consider any factor in the evaluation of an investment or investment course of action that, depending on the facts and circumstances, is material to the risk-return analysis.

The proposal includes several ESG factors as examples of the facts and circumstances that can be considered if material to the risk-return analysis. The DOL proposal would also make a number of changes to the proxy voting and exercise of shareholder rights provisions applicable to ERISA fiduciaries. Comments are due by December 13, 2021.

– Dave Lynn