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US SIF Statement on today’s release of Department of Labor final rule on ESG and proxy voting in ERISA plans

US SIF congratulates the DOL on the rule which makes clear that fiduciaries may consider environmental, social and governance factors (ESG) in their investment decisions and when they exercise shareholder rights. 
WASHINGTON, D.C., November 22, 2022 -- US SIF: The Forum for Sustainable and Responsible Investment today released a statement from Lisa Woll, CEO, on the Department of Labor (DOL) final rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights.”

“US SIF has been a leading actor, through several administrations, to ensure that ESG criteria and proxy voting can be included in ERISA governed plans. We congratulate the DOL on the rule which makes clear that fiduciaries may consider environmental, social and governance factors (ESG) in their investment decisions and when they exercise shareholder rights.

“The final rule recognizes that the consideration of ESG criteria can help protect the long-term interests of retirement beneficiaries and should be treated like any other investment criteria used by plan fiduciaries under the duty of loyalty and care. 
“The new rule also removes the “special rules” for Qualified Default Investment Alternatives (QDIA) and confirms that standards applied to QDIA are no different than those applied to other investments.  

“In reality, the rule is catching up to where the marketplace has been for years. Investors understand that it is important to take into account how a company treats its workforce, whether it pays its fair share of taxes, their political spending, its supply chain, and whether the company is ready for the transition to a low-carbon economy.

“We appreciate the work done by DOL to ensure that ERISA fiduciaries have clear rules for the road. The final rule helps to address the gap between the growth of sustainable investment overall and the much more limited growth of sustainable investment options in retirement plans. We look forward to working with DOL to implement the final rule.” 

Background:
In 2020, the Trump administration issued rules that made it more difficult to consider ESG in ERISA plans, especially in default options, and increased regulatory burdens on fiduciaries when voting proxies.

On March 10, 2021, DOL issued a statement that they would not enforce the Trump-era rules related to the use of environmental, social and governance (ESG) criteria in ERISA-governed retirement plans and the voting of proxies in those plans. On October 13, 2021, DOL issued the proposed rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights.”

The final rule is available here.

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