DOL puts ROI ahead of ESG for ERISA plans

(Photo: Shutterstock)

On June 23, 2020, the Department of Labor (DOL) announced a proposed rule to provide further guidance for Employee Retirement Income Security Act (ERISA) plan fiduciaries interested in environmental, social and governance (ESG) investing. As ethical investing gains traction, plan managers have begun exploring socially responsible investment options for defined contribution and defined benefit retirement plans. But according to the new proposal by the DOL, those ethical investment strategies must be driven by one underlying factor: financial returns.

The DOL’s proposed rule seeks to codify the department’s long-standing position that, while plan fiduciaries are not prohibited from ESG investing, the paramount focus of plan fiduciaries must be “solely on pecuniary factors.”