Biden administration proposes rule on environmental, social and governance in retirement

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Biden administration proposes rule on environmental, social and governance in retirement

The Biden administration has proposed changes to make it clear that administrators of retirement plans can consider environmental, social and governance factors in their investment decisions.

The proposal is in line with the executive order by President Joe Biden to protect American financial security from climate-related financial risks according to the Department of Labor. It follows through with the current administration s decision not to enforce the rules finalized under the Trump administration last year, which contained language requiring retiree fiduciaries to make investment decisions based solely on financial factors.

As part of its responsibilities to protect the rights of U.S. workers, job seekers and retirees, the Labor Department oversees retirement plans. The proposed rule will bolster the resilience of workers retirement savings and pensions by removing the prior impediments — and chilling effect on environmental, social and governance investments — caused by the artificial administration's rules, Acting Assistant Secretary of the Department of Labor s Employee Benefit Security Administration Ali Khawar said in a statement. The department proposes the changes after it heard from stakeholders who expressed concern that the rules put forth by the previous administration have been interpreted as putting a thumb on the scale against consideration of ESG factors, even when those factors are financially material, according to supplementary information included in the proposed rule. The DOL's position on ESG investing is squarely in line with the fiduciary duty of the retirement plans they manage, full stop. Incorporating environmental, social and governance risks and opportunities into retirement portfolios not only allows investors to mitigate material climate change risk but also invest in companies that are commercializing profitable solutions to our sustainability challenges. Labor Department is invited public comment on proposed rule until Dec. 13.