Social(K) BLOG
October 18, 2021

Ending Regulatory Pendulum Holding Back Inclusion of Funds Utilizing ESG in Retirement Plans

On October 13th, The Forum for Sustainable and Responsible Investment released a statement from Lisa Woll, CEO, on the Department of Labor (DOL) proposed rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights.”

Today's announcement is an important step towards ending the regulatory pendulum that is holding back the inclusion of funds utilizing ESG criteria in retirement plans and complicating proxy voting by plan fiduciaries. 

The proposal recognizes that the consideration of ESG criteria is part of the investment process and should be treated like any other investment criteria used by plan fiduciaries under the duty of loyalty and care.

Significantly, the proposal removes the artificial barriers created by the 2020 rules for ESG consideration in default plans, or Qualified Default Investment Alternatives (QDIAs). 

The proposal also recognizes the proxy vote as an ownership right and removes provisions that may have discouraged fiduciaries from exercising their ownership rights.

We appreciate the work done by DOL to address the damage done by the previous administration and to ensure that ERISA fiduciaries have new rules for the road.  The proposed guidance should help address the gap between the growth of sustainable investment overall and the much more limited growth of sustainable investment in retirement plans. We look forward to working with DOL on a final rule.


Background

In 2020, the Trump administration issued rules that made it more difficult to consider ESG in ERISA plans, especially in default options, and increased regulatory burdens on fiduciaries when voting proxies.

On March 10, 2021, DOL issued a statement that they would not enforce the Trump-era rules related to the use of environmental, social and governance (ESG) criteria in ERISA-governed retirement plans and the voting of proxies in those plans.

About US SIF

The Forum for Sustainable and Responsible Investment is the leading voice advancing sustainable and impact investing across all asset classes. Its mission is to rapidly shift investment practices toward sustainability, focusing on long-term investment and the generation of positive social and environmental impacts. US SIF members include investment management and advisory firms, mutual fund companies, asset owners, research firms, financial planners and advisors, community investing organizations and nonprofit associations.

US SIF is supported in its work by the US SIF Foundation, a 501(C)(3) organization that undertakes educational and research activities to advance the mission of US SIF.



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