ESG rule finalized | Ary Rosenbaum – The Rosenbaum PC Law Firm

The Department of Labor (DOL) has completed its ESG rule for pension plans and sent it to the White House for final approval.

The final version of this rule will not be published until November.

The proposed rule was released in October 2021. It reversed provisions in two Trump-era rules that discouraged the use of ESG criteria in 401(k) plans and other employer-sponsored retirement plans. The proposed rule stated that ESG factors can be considered financially material in the selection of investments and that sustainable funds can be used as default investments in plan menus. By allowing pension plans to include ESG-themed investments by default, the DOL would allow target date funds and other asset allocation products to broadly incorporate ESG factors and not infringe regulations.

The proposed rule was also intended to clarify that climate change may be an important factor for pension funds to consider when voting on shareholder resolutions.

The problem for me is that I come from a school where investment selection is based on total return and with a political football that it has become the rule is subject to who sits in the White House, and that could change in 2024.