The Department of Labor (DOL) has recently backtracked on two final rules they published in late 2020 regarding the use of ESG (Environmental, Social, & Corporate Governance) investments in qualified plans and the voting of proxies by plan fiduciaries.
- A rule that required fiduciaries’ investment decisions be based ‘solely on consideration of pecuniary factors.
- A rule that addressed fiduciary obligations when voting proxies or exercising other rights in connection with plan investments.
The DOL issued a statement on March 10, 2021 indicating that they will not enforce either of these rules, stating “these rules have created a perception that fiduciaries are at risk if they include any environmental, social, and governance factors in the financial evaluations or plan investments and that they may need to have special justifications for even ordinary exercises of shareholder rights.” Rather, the DOL stated that they intend to “determine how to craft rules that better recognize the important role that ESG integration can play in the evaluation and management of plan investments, while continuing to uphold fundamental fiduciary obligations.”