LABOR DEPARTMENT FINALIZES ESG RULE

Posted on October 30, 2020

WASHINGTON, D.C. – The U.S. Department of Labor (DOL) issued a final rule to provide regulatory guideposts for plan fiduciaries seeking to invest using non-pecuniary principles, particularly those involving environmental, social, and governance (ESG) investing.

“We are disappointed that the DOL decided to move forward with this final rule, but we recognize and appreciate the meaningful improvements they’ve made over the original proposal,” said Jason Berkowitz, IRI Chief Legal and Regulatory Affairs Officer. “We continue to believe the Department should maintain the long-standing, principles-based approach to investment selection by ERISA fiduciaries.”

IRI had urged DOL to withdraw the proposed ESG rule in June. Berkowitz said that IRI and its members are reviewing the final rule in detail to better understand its ramifications for retirement savers, plan sponsors, and the industry.

“The final rule reflects the DOL’s acknowledgment that the proposal sought to put up guardrails around the use of ESG investments in retirement plans without adequately defining the types of investments that would have been covered. We remain concerned, however, that the final rule could make the investment selection process for plan sponsors much more complicated and burdensome than is necessary to effectively protect plan participants from financial risk,” Berkowitz added.

In its June comments on the then-proposed ESG rule, IRI identified potential impacts on investment selection and successful plan financial performance, heightened risks of regulatory burdens, and inconsistencies with long-standing, Department principles-based rules.

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Contact: Dan Zielinski