US SIF was instrumental in advocating for the 2015 DOL Interpretive Bulletin clarifying that fiduciaries of ERISA-governed pension plans need not treat commercially reasonable investments as inherently suspect or in need of special scrutiny
WASHINGTON, DC, June 24, 2020 /Neptune100/ — Yesterday, the US Department of Labor (DOL) released a proposed rulemaking to revise the fiduciary standard for ERISA-governed retirement plans. The proposal attempts to clarify when retirement plan fiduciaries may consider environmental, social and governance (ESG) criteria in investments covered under ERISA. In so doing, DOL creates a schism between its narrow definition of ESG related economic business risks or opportunities and the financial markets themselves, which saw a 38% increase between 2016 and 2018 in professionally managed assets that incorporated ESG criteria.
The following statement is from Lisa Woll, CEO, US SIF: The Forum for Sustainable and Responsible Investment:
“The proposed rule suggests, but without evidence, that the growing emphasis on ESG investing may be prompting ERISA plan fiduciaries to make investment decisions for purposes distinct from providing benefits to participants and beneficiaries and defraying reasonable expenses of administering the plan.
“However, the DOL proposal is out of step with professional investment managers, who increasingly analyze ESG factors precisely because of risk, return and fiduciary considerations. In US SIF’s 2018 survey of sustainable investment firms in the United States, 141 money managers with aggregated assets of more than $4 trillion responded to a question on their motivations for incorporating ESG criteria into their investment process. Three-quarters of these managers cited the desire to improve returns and to minimize risk over time. Fifty-eight percent cited their fiduciary duty obligations as a motivation.
“Generating more hurdles to the incorporation of ESG criteria will have a chilling effect, leading to plan participants losing access to ESG options