ASBC & SVC Applaud Department of Labor Decision Permitting Consideration of ESG Investment Criteria
Washington, D.C. — Yesterday, the U.S. Department of Labor today announced a proposed rule that would remove barriers to plan fiduciaries’ ability to consider climate change and other environmental, social and governance factors when they select investments and exercise shareholder rights.
The proposed rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” follows Executive Order 14030, signed by President Biden on May 20, 2021. The order directs the federal government to implement policies to help safeguard the financial security of America’s families, businesses and workers from climate-related financial risk that may threaten the life savings and pensions of U.S. workers and families.
The American Sustainable Business Council and Social Venture Circle applaud the DOL’s proposed rule and look forward to submitting comments of support. According to Jeffrey Hollender, Co-Founder, CEO, Board Chair and Chair of its Corporate Transparency & ESG Disclosure working group, “ASBC and SVC commend the DOL as this serves the interest of investors and will level the playing field when it comes to selecting among investment choices. It is essential that employees are given better investment options when it comes to their finances and retirement so they can select the investments that are most suitable for themselves and their personal choices.”
The Trump administration adopted a rule after the 2020 November elections, asserting a retirement plan’s investment decisions should be made only based on financial factors.
In the summer of 2020 the American Sustainable Business Council (ASBC) and our strategic partner Social Venture Circle (SVC) created a sign on letter, with over 350 signatures, for businesses to voice their support for the consideration of ESG criteria. ASBC and SVC were very outspoken and action oriented about the rejection of ESG in the ERISA negatively impacting the people of the US, and how this decision needed to be reversed.
On October 13, 2021, President Biden signed that climate change along with many other factors are risks that must be considered in this instance. During the Trump administration ESG factors were not clearly stated in ERISA, but this new statement will clarify and be more inclusive in what these factors will be. ESG is starting to shape businesses and the economy and so for the economy to keep growing we need to take ESG factors into account.
Quotes from Select ASBC-SVC Business Members:
Closed Loop Partners
“The Biden administration’s recognition that using environmental and social factors to evaluate an investment is critical to helping investors maximize returns and reduce risk.”
— Ron Gonen, CEO, Closed Loop Partners
Green Retirement
“Sustainable and responsible investing, which puts at its center the way that companies treat people and planet, is the future of investing. We, at Green Retirement, have seen how much value our plan sponsors and their employees place on being able to see how the money they’re saved for retirement is protecting that very future that they’re saving for. We welcome this move by the Biden administration to show that they are committed to listening to the growing number of investors who are demanding more than just financial performance from their investments. It is high time that we put to rest the myth that sustainable and responsible investing is harmful to financial performance. Our clients who are divested from fossil fuels and invested in climate solutions feel vindicated by this Biden administration move to reverse the Trump ruling. Socially responsible investing is one of the most effective tools in the investor’s arsenal to address climate change, resource scarcity, and income inequality. We are glad to see the Biden administration adhere to its election promise of working on solutions for climate change and environmental justice by rescinding this Trump ruling.”
— Rose Penelope L. Yee, CPFA, CHSA, CEO, Green Retirement
JSA Sustainable Wealth Management
“In my opinion, and in the opinion of many professional investment managers and retirement plan fiduciaries who wisely incorporate ESG factors in their careful analysis of securities and plan offerings, the DOL has been out of step. The past proposal by the DOL to revise the fiduciary standard for ERISA-governed retirement plans was an interference to our work, and was made without evidence and not in the spirit of serving participants and beneficiaries of plans. We are seeking to improve returns and minimize risk over time. Environmental factors, good corporate governance and company qualities of fairness, diversity and transparency are all factors that we must measure when analyzing the long-term success of publicly traded companies. The DOL should not create burdens for fiduciaries to carry out their responsibilities by singling out ESG criteria for requiring additional documentation and analysis. These ESG criteria are applied with a great deal of careful disciplined objective research. Instead, the DOL should be focusing more on investor education and behavior, which can often be dominant factors in real long-term performance by participants. I would suggest that the DOL consider encouraging ESG investments to be added as components of qualified default investment alternatives (QDIAs) so that participants are more assured that environmental, social and corporate governance risk factors are considered.”
— Jeffrey Scales, CFP®, AIF®, Managing Principal, JSA Sustainable Wealth Management
Trillium Asset Management
“This decision by the Department of Labor demonstrates how dramatically out of step the Trump Administration was when it came to the realities of ESG investing. Fiduciaries understand that integrating ESG factors into the investment process is important and can help incentivize corporations to build successful businesses that serve the interests of employees, suppliers, customers, communities, ecological health, and investors.”
— Matt Patsky, CEO, Trillium Asset Management