The American Bankers Association this week urged the Department of Labor to withdraw a proposal that would limit pension fiduciaries’ consideration of environmental, social and governance-related issues when selecting plan investments. The proposal—which comes at a time when interest in “sustainable investing” is on the rise—would significantly expand on an existing rule on investment duties that has been in place for more than 40 years. Specifically, the proposal would impose a rebuttable presumption that ESG investments are not prudent and require fiduciaries to conduct additional analysis and documentation when considering ESG investments.
Among other things, ABA raised concerns that the proposal could limit the prudent integration of ESG factors for risk mitigation. “Fiduciaries need the discretion to evolve with the constantly changing financial landscape and theories that also develop alongside it,” ABA said. “It would be unfortunate to lock in a negative presumption against factors that fiduciaries now may deem relevant and prudent, and more may find so in the future.”
