About a year ago, the Trump administration tightened the rules that dealt with ESG investments as “suspect” in pension plans. The DOL added new language continuing to reinforce the idea that ESG blurs the line between what is acceptable and non-compliance with the fiduciary standard.
However, that is about to change.
In May, President Biden issued an executive order to overturn Trump’s rules from October and force the DOL to examine carefully ESG and its adequacy. The order also asks the Federal Retirement Thrift Investment Board, which covers retirement savings plans issued by the Fed for federal employees, to do the same. Likewise, a bill introduced by the Democrats would directly bypass the DOL and allow ESG investments to consider in ERISA-retirement plans.
And it looks like DOL will deliver.
Although the agency has not officially released its rules, The DOL submitted its proposed rules to the White House’s Office of Management and Budget in August. Due to budget issues and the stalemate in Washington, these rules have not been formalized. However, policymakers expect that DOL and the White House expects to make those rules public by the end of the year.
In addition, several other groups and advisory councils have already started to incorporate these rules into their frameworks. For example, the United States SIF Foundation, which is a ESG specialist group for investment promoters, has published an updated version of its five-step guide for defined contribution plan sponsors. This included the pending DOL regulations and what sponsors can do to add ESG to their plans and not come up against ERISA rules.
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