US SIF Issues Statement on Department of Labor Rulemaking Related to ERISA and ESG Considerations

US SIF CEO Lisa Woll says the Department of Labor provided no evidence that plan fiduciaries have been inappropriately selecting ESG investments or that ESG focused funds have given up returns in exchange for 'non-pecuniary' benefit

    WASHINGTON, DC, October 30, 2020 -- US SIF: The Forum for Sustainable and Responsible Investment today issued the following statement on the Department of Labor's final rulemaking related to ERISA governed retirement plans offering fund options that assess ESG (environmental, social and governance) criteria in addition to other financial criteria ("Financial Factors in Selecting Plan Investments").

US SIF CEO Lisa Woll said, "In the proposed rulemaking, the Department of Labor provided no evidence that plan fiduciaries have been inappropriately selecting ESG investments or that ESG focused funds have given up returns in exchange for 'non-pecuniary' benefits.

"In an analysis of more than 8,700 comments submitted in response to the proposal, 95% of commenters opposed the proposal and 94% of comments from investment professionals opposed it.

"This final rule simply reflects the problems evident in the proposed rulemaking. It is an effort to limit the use of ESG criteria in investments. Abundant data debunks the premise that utilization of ESG criteria is problematic.

"It also puts a substantial burden on fiduciaries who consider ESG factors in their retirement plans, requiring additional documentation to justify why ESG factors are financially material. The rule will also effectively prohibit ESG considerations in default investment options for plans (Qualified Default Investment Alternatives, or QDIA).

"The Labor Department moved forward with only a 30-day comment period. In an extremely short time period, the DOL reviewed 1,100 individual comment letters and submitted a final rule. This unprecedented speed is an indication of the Labor Department's desire to get this done before the election. This is not sound policy making.

"This rule is out of step with professional investment managers who increasingly analyze ESG factors precisely because of long-term risk, return and fiduciary considerations. Investments under professional management utilizing ESG factors increased from $8.7 trillion at the start of 2016 to $12.0 trillion at the start of 2018, a 38 percent increase.

"The rule will create confusion in the entire retirement market about the ability to offer funds that utilize ESG criteria. We realize that this is the intention of the Department of Labor, but it is wrong and most importantly, shortsighted."

US SIF's comment letter on the original proposal can be found here.

About US SIF and the US SIF Foundation

US SIF: The Forum for Sustainable and Responsible Investment is the leading voice advancing sustainable and impact investing across all asset classes. Its mission is to rapidly shift investment practices toward sustainability, focusing on long-term investment and the generation of positive social and environmental impacts. US SIF members include investment management and advisory firms, mutual fund companies, asset owners, research firms, financial planners and advisors, community investing organizations and nonprofit associations.

US SIF is supported in its work by the US SIF Foundation, a 501(C)(3) organization that undertakes educational and research activities to advance the mission of US SIF. The Foundation offers training on the Fundamentals of Sustainable and Impact Investment and in partnership with the College for Financial Planning, offers the only sustainable investment designation in the United States, the Chartered SRI Counselor™ (CSRIC™). This graduate-level program provides financial advisors and investment professionals with the history, definitions, trends, portfolio construction principles, fiduciary responsibilities and best practices of sustainable investment. In addition, the US SIF Foundation offers a free online course for individual investors on the basics of sustainable investing.

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