The U.S. Department of Labor is proposing new rules that would give pension plan fiduciaries the ability to make investment decisions based on environmental, social and governance factors.
If adopted, the rules would amend the Employee Retirement Income Security Act of 1974. In its summary of the proposed changes, the Department of Labor said they’d be designed to clarify prudence and loyalty expectations.
The proposed rules have been published in response to an executive order signed by President Joe Biden in May, which directs federal government employees to implement rules that will help safeguard America’s financial security from climate-related risks.
In a press release, Ali Khawar, acting assistant secretary for the employee benefits security administration, said the proposed rules would remove artificial impediments that make it more difficult for plan fiduciaries to invest in ESG-related opportunities. “A principal idea underlying the proposal is that climate change and other ESG factors can be financially material and, when they are, considering them will inevitably lead to better long-term risk-adjusted returns, protecting the retirement savings of America’s workers.”
After a consultation period on the proposed changes, the rules may be formally accepted by the Department of Labor. The comment period will close on Dec. 12, 2021.