Retirement-investing plan advisers can still consider environmental, social and governance (ESG) features – as President Joe Biden has vetoed Republicans’ latest attempt to limit the consideration.
President Joe Biden as promised has vetoed the latest attempt to limit how much retirement-fund managers, including for 401s and pensions, consider climate change, corporate board diversity and other factors when picking the stocks and funds that many workers will rely on for retirement savings.
“The [DOL] rule reflects what successful marketplace investors already know —there is an extensive body of evidence that environmental, social and governance factors can have material impacts on certain markets, industries and companies,” said a statement from the White House, at the time Congress acted.
Senate Majority Leader Charles Schumer, a New York Democrat, used a Wall Street Journal op-ed to suggest that it’s simply free markets at work when funds can use ESG to help decide stock winners and losers. “The Department of Labor’s ESG rule is a sensible policy allowing retirement plan fiduciaries to consider all financially relevant information when making investment decisions,” Bryan McGannon, managing director of U.S. SIF, an advocacy group for sustainable investing, said. “This benefits plan participants and it ends the retirement policy pendulum between administrations. These gains are undermined by today’s vote to kill the rule.
“The only factors that should be considered are those that demonstrably affect bottom lines,” he continued. “If fund managers want to consider ESG issues, the duty lies with them, under ERISA and background fiduciary-duty law, to make the connection between the ESG proposal and the fund’s bottom line, and to show their work… rather than simply relying on slogans and jargon or fail to consider all relevant inputs.
“Telling investors to not think about climate change is like telling them they shouldn’t be thinking about inflation,” he said. “Nowhere does the rule say funds have to divest from certain companies, like fossil-fuel companies. Everyone makes their own judgement.” And he said his group and others are trying to increase the education around ESG and how it ties into fiduciary responsibility.
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