![]() Employers and plan fiduciaries can evaluate ESG in any number of ways. This regulatory back-and-forth has been particularly hot in the last two years as the Trump and Biden administrations have staked out different positions through DOL action.įor these reasons, it can be helpful for employers and retirement plan fiduciaries to understand the ERISA issues created by using ESG criteria in selecting and managing retirement plan investments, including why this remains an area of changing legal standards, especially in the last few years.īroadly speaking, in the retirement plan context ESG investing refers to the consideration of factors related to the environment (such as a company's record on pollution and sustainability), social goals (such as supporting unions or divesting from certain industries), or corporate governance (such as company and board diversity). Department of Labor (DOL), has provided conflicting guidance on how to apply ERISA's fiduciary standards to ESG. ![]() Instead, ERISA's fiduciary standards must be considered.Īdding to the challenge of this issue is that for the last 25 years the primary regulator of those standards, the U.S. This means that employers cannot blindly use ESG. ![]() Those fiduciary standards require that ESG investing by retirement plans be made through a prudent process and in accordance with the employees' retirement investing interests. The answer to the question of whether ERISA permits consideration of ESG is yes - but only if the application complies with ERISA's fiduciary standards. In part, this interest can be driven by corporate ESG goals or by the interest of employees (or other stakeholders), or a combination of both. SeptemFor retirement plans, including private company retirement plans regulated by the Employee Retirement Income Security Act of 1974 (ERISA), employers often ask about whether they can give consideration to "environmental, social, or governance" (ESG) factors when selecting investment options.
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