A Northern District of Texas federal judge just sided with the U.S. Department of Labor in a lawsuit challenging its rule permitting retirement plan fiduciaries to consider climate change and other ESG factors when selecting investments and exercising shareholder rights.
The rule called Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights allows ERISA fiduciaries to consider environmental, social and governance factors, does not violate the Employee Retirement Income Security Act (ERISA) nor is it arbitrary and capricious, Judge Matthew Kacsmaryk wrote in his decision.
Earlier this year Republican attorneys general from 26 states filed a lawsuit State of Utah et al. v. Su et al., that argued the DOL rule undermines key protections for retirement savers, oversteps the department's authority under ERISA and is arbitrary and capricious.
In Reuters and Bloomberg Law articles, Joshua Lichtenstein, a partner in Ropes & Gray’s employment, executive compensation and employee benefits group and head of the firm’s ERISA fiduciary practice, explained that in theshort term this ruling is a major step in protecting the future of the Biden administration’s rule. In the long term, he said the way this has been treated as a political issue isn’t likely to change.
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