Joshua Lichtenstein Comments on Department of Labor’s ESG Proposed Rule in Ignites

ERISA and benefits partner Joshua Lichtenstein spoke to Ignites about the Department of Labor’s proposal that would outline how plan fiduciaries may consider ESG factors when selecting investments.

Joshua discussed how the “tiebreaker” test, which allows fiduciaries to use nonfinancial factors when selecting between two indistinguishable investment options, is seldom used.

Although the tiebreaker has existed in guidance for "a long time," Joshua said, using the tiebreaker test is "not a position people generally want to be in."

Joshua also commented on whether the proposal would include restrictions on proxy voting for nonfinancial reasons, and how it could compare with the first Trump administration’s ESG rule and the current rule finalized during the Biden administration.     

"The Trump administration rule sort of built from this presumption that most proxy voting probably wasn't actually in the best interest of plan participants and built out a way for plan sponsors to adopt safe harbor approaches to determine when or when not to vote proxies, which would result in less proxy voting," Joshua said. "The Biden administration took that part of the proxy rule away but left all the other proxy language intact from the Trump rule."

The proposed regulation is currently under review at the White House’s Office of Information and Regulatory Affairs.