The Biden Labor Department will soon finalize a new rule on environmental, social, and corporate governance (ESG) investments, and one big question remains: When will fiduciaries be permitted to take ESG values into account as they select investment options for 401(k) plans?

The Department of Labor, which has sent its final version of the rule to the White House for approval, has wrestled for more than 30 years with when and how fiduciaries can consider non-economic ESG factors. It issued guidance related to this question in each of the Clinton, Bush, Obama, and Trump administrations.

These administrations have generally agreed that ESG factors can be taken into account if their consideration boosts investment return or reduces investment risk. Where Republicans and Democrats have disagreed is around when ESG factors can be considered if they do not boost investment performance. Republicans have suggested the correct answer is never, unless there is a tie between prospective investment vehicles. Democrats have suggested that ESG should be considered as a factor whenever there is a tie. Both Democrats and Republicans have used the “tie-breaker” phrasing, but the parties have meant different things by it.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.

Already have an account?

 

Treasury & Risk

Join Treasury & Risk

Don’t miss crucial treasury and finance news along with in-depth analysis and insights you need to make informed treasury decisions. Join Treasury & Risk now!

  • Free unlimited access to Treasury & Risk including case studies with corporate innovators, informative newsletters, educational webcasts, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM publications including PropertyCasualty360.com and Law.com.

Already have an account? Sign In Now
Join Treasury & Risk

Copyright © 2022 ALM Global, LLC. All Rights Reserved.