DOL Proposes Rule on ESG Investing in Pension Plans

With interest around sustainable investing—sometimes referred to as environmental, social and governance (or ESG) investing—on the rise, the Department of Labor this week issued a proposed rule that would confirm Employee Retirement Income Security Act requirements for plan fiduciaries to select investments and investment courses of action based solely on financial considerations relevant to the risk-adjusted economic value of a particular investment or investment course of action.

The proposal would significantly expand on an existing rule on investment duties that has been in place for more than 40 years. Specifically, it clarifies that “fiduciaries may never subordinate the interests of plan participants and beneficiaries in their retirement income to non-pecuniary goals.” Comments are due by July 30.