Among other factors, the U.S. election will decide how the country handles topics like climate, sustainability and ESG, as the Harris and Trump administrations broadly represent different ends of the spectrum on the issues.
The Biden administration’s Department of Labor is currently defending a rule that allows pension fund managers to consider ESG factors as a tiebreaker. The rule, which has been in effect since January 2023, was designed to counteract a chilling effect from a rule implemented by the Trump-era Labor Department, the agency said when issuing the rule.
In an ESG Dive article, ERISA and benefits partner Josh Lichtenstein explained that the prior fiduciary rule was written so broadly that private 401k plan fiduciaries, governed by ERISA, were concerned that including even non-sustainability focused index or target funds could result in plan sponsors being accused of allegedly having considered ESG factors as part of the investment decision.
Josh expects that if elected the Trump administration would find a way to go back to the 2020 fiduciary rule that chilled pension plan managers. If a final determination isn’t reached in the legal challenge by the change in administration, a Republican-led government would likely stop defending it in courts, and the department would likely return to its focus on pecuniary factors, said Josh.
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