DOL Takes Strong ERISA 401k, ESG Fiduciary Stance

401k, retirement, ERISA, DOL, ESG

The ESG outlook just got more complicated.

It might be harder to “invest in your values” if a proposed rule form the Department of Labor goes through.

The regulatory body announced Tuesday that ERISA plan fiduciaries may not invest in environmental, social and governance (ESG) vehicles when an underlying investment strategy decreases return or increases risk to achieve non-financial objectives.

The DOL acknowledged that different iterations of regulatory guidance have created fiduciary confusion with respect to these ESG investment issues, and the proposed rule is intended to provide “clear regulatory guideposts.”

“The department’s proposed rule reminds plan providers that it is unlawful to sacrifice returns, or accept additional risk, through investments intended to promote a social or political end,” Labor Secretary Eugene Scalia wrote in an op-ed in The Wall Street Journal explaining the rule.

“A fiduciary’s duty is to retirees alone, “he bluntly continued, “because under ERISA one ‘social’ goal trumps all others—retirement security for American workers.”

The rule makes five additions to the regulation:

 The Employee Benefits Security Administration (EBSA) developed the proposed rule.

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