New Rules for ESG Funds: Public Comment Requested

I will admit that I don’t spend a lot of time thinking about or studying fiduciary rules related to retirement plans, but a new proposal from the Department of Labor has me a bit concerned.  Recently, DOL issued a proposed rule (with a request for comments by July 30, 2020) related to private sector retirement plans (such as 401Ks) that include funds with an environmental, social, and governance (ESG) focus.  These ESG funds seek to promote both financial and social benefit goals, and have outperformed the market in recent years.  The proposed rule would define ESG criteria as “non-financial” factors.  This shift could have the effect of limiting the availability of these retirement fund options because fund managers are required to offer fund options based primarily on financial factors alone.  Under the new rule, ESG advocates believe that fund managers would likely opt to avoid including ESG funds as an option in many retirement funds.  (This is a very complex issue so if you want to learn more, visit here and here.)  ESG advocates further warn that this move would greatly limit future funding for ESG-related investments that focus on supporting a triple bottom-line of profit along with environmental and social benefits. As a result, a promising, growing and successful set of tools for socially-responsible investing may be restricted. If you share these concerns, share them with DOL or reach out to your Senator or Member of Congress by July 30!