On Oct. 13, 2021 The U.S. Department of Labor announced a proposed rule that would remove barriers to plan fiduciaries’ ability to consider climate change and other environmental, social and governance factors when they select investments and exercise shareholder rights.
Insights from ERISA partner Josh Lichtenstein on how the proposals differ from rules under the Trump and Obama administrations were widely cited in media, with remarks featured in the Financial Times, Ignites, Pensions & Investments, Law360, ETF Database , ESG Investor, and Plan Adviser. Josh was also featured in a video interview aired by FundFire.
In Financial Times Josh comments “the DoL’s new proposed regulation should dramatically expand the ability for [retirement] plan sponsors to offer funds that focus on or include ESG as investment options for participants”. The Trump-era rule is said to have left a “chilling effect” on employer retirement plans that the Biden proposal would remove. Josh’s explanation of the proposed ESG rule is also featured in Ignites where he states the rule appears to create a presumption that every time a plan sponsor considers an investment and its return, it should either consider the effects of ESG factors or be able to explain why it didn’t. This would be a big move for climate change leaders. Law360 reasserts that with the DOL proposal retirement plan fiduciaries — the individuals or entities that manage an employee benefit plan and its assets — may consider environmental, social and governance factors when they select investments. Josh said the plan would "make it extremely clear that plan sponsors evaluating investments can consider ESG factors as economic factors and may even create a presumption that plan sponsors should be considering ESG factors as part of all investment decisions." In ETF Database climate change is described “an imminent material financial” risk that US plan fiduciaries must consider, experts assert. If the rule is finalized in this form, many of the old barriers to ESG investing for ERISA plans should fall away,” said Josh.
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