US SIF Comments on DOL Field Bulletin on the Fiduciary Standards under ERISA
US SIF Comments on DOL Field Bulletin on the fiduciary standards under ERISA relating to proxy voting and shareholder engagement activities, and consideration of “economically targeted investments.”Washington, D.C., April 26, 2018 - On April 23, the Department of Labor issued a “field assistance bulletin” related to the DOL 2015 guidance on economically targeted investments (the ESG bulletin) and the DOL 2016 guidance on Shareholder Rights. US SIF played an important role in the advancement of the 2015 and 2016 guidance, and consequently, we have received inquiries from US SIF members and media representatives for our analysis of the bulletin.
1. The field bulletin is a “lower level” policy statement than the Interpretive Bulletins launched in 2015 and 2016. It does not rescind any portion of the 2015 and 2016 guidance. The purpose of field assistance bulletins generally is to augment the language of Interpretive Bulletins, sometimes in quite detailed and technical language, and Field Assistance Bulletin No. 2018-01 is no exception.
2. Field Assistance Bulletin No. 2018-1 restates and reaffirms the original rationale behind Interpretive Bulletin 2015-1, which was to clarify that “plan fiduciaries should appropriately consider factors that potentially influence risk and return. Environmental, social, and governance issues may have a direct relationship to the economic value of the plan's investment.” This rationale also was the impetus behind the 2016 Shareholder Rights Bulletin.
3. The field bulletin statement on ESG Investment Considerations does differentiate in Footnote 8 between ESG themed funds and incorporation of ESG factors which is different from the 2015 guidance. “ESG-themed funds (e.g., Socially Responsible Index Fund, Religious Belief Investment Fund, or Environmental and Sustainable Investment Fund), should be distinguished from non-ESG-themed investment funds in which ESG factors may be incorporated in accordance with IB 2015-01 and IB 2016-01 as one of many factors in ordinary portfolio management and shareholder engagement decisions.”
4. The technical clarification offered by the 2018 Field Assistance Bulletin relates to the qualified default investment alternative (QDIA) for 401k-type plans that offer a menu of investment fund options. The QDIA is the fund in which the plan sponsor must enroll participants if the participants themselves are unable or willing to make their own fund selections. The Field Assistance Bulletin says that plan sponsors may designate a fund for the QDIA that considers ESG factors, but only if this consideration is part of the economic analysis the fiduciaries undertake to ensure the QDIA will further the interests of plan participants and beneficiaries in their retirement income. More explicitly themed religious, SRI or impact funds, it says, will not be appropriate for the QDIA, even when they are permissible as part of the overall menu of options an ERISA plan offers.
About US SIF
US SIF: The Forum for Sustainable and Responsible Investment is the leading voice advancing sustainable, responsible and impact investing across all asset classes. Its mission is to rapidly shift investment practices toward sustainability, focusing on long-term investment and the generation of positive social and environmental impacts. US SIF members include investment management and advisory firms, mutual fund companies, research firms, financial planners and advisors, broker-dealers, community investing organizations, nonprofit associations, and pension funds, foundations and other asset owners.
US SIF is supported in its work by the US SIF Foundation, a 501(C)(3) organization that undertakes educational, research and programmatic activities to advance the mission of US SIF, including offering trainings on the Fundamentals of Sustainable and Impact Investment. Learn more at www.ussif.org.