Pending rulemaking set to limit ESG-focused investments by ERISA plan fiduciaries, as DOL’s concurrent letters raise questions.
By Paul A. Davies, Paul M. Dudek, and Kristina S. Wyatt
Letters to Registered Investment Advisors (RIAs)
The US Department of Labor (DOL) has reportedly sent letters to several registered investment advisors seeking information about their use of environmental, social, and governance (ESG) funds in retirement plans, as reported by media outlets including Financial Advisor Magazine and Think Advisor. According to news sources, the DOL’s Employee Benefits Security Administration has asked the RIAs for detailed information about their policies and practices regarding ESG-focused investments. The information requested reputedly includes the RIAs’ policies and procedures, communications, performance information, and the names of individuals who participated in making ESG-focused investment decisions.
The timing of the DOL letters has raised eyebrows given the agency’s pending rulemaking, which aims to restrict plan fiduciaries’ investments in ESG funds, as noted below. News outlets quoted Bryan McGannon, director of Policy and Programs at US SIF, the Forum for Sustainable and Responsible Investment, as objecting to the enforcement actions: “This is a move that is clearly designed to intimidate and if it’s followed up by enforcement it will have a chilling effect on fiduciaries’ willingness to consider ESG funds in retirement plans.” Continue Reading