The Department of Labor has effectively finished its ESG rule for retirement plans and sent it to the White House Thursday for final approval.
The final version of that rule, which has been in the works since last year, likely will not be published until next month.
The proposed version of the rule came out in October 2021. It essentially walked back provisions of two Trump-era rules that had a chilling effect on the use of ESG criteria in 401(k)s and other employer-sponsored retirement plans. A final DOL rule would solidify permissiveness on ESG that previously was vague or had varied as administrations changed.
The Biden DOL’s proposed rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” clarified that ESG factors can be considered financially material in investment selection and that sustainable funds can be used as the default investments on plan menus. The latter was prohibited under the Trump rules.
By allowing 401(k)s to include ESG-themed investments as the default, the DOL would make it possible for target-date funds and other asset-allocation products to widely incorporate sustainability factors and not run afoul of regulations. For the sustainable investing world, that would be a massive change, as target-date funds, managed accounts and other all-in-one products are the most widely used products in retirement plans. Participants in 401(k)s tend not to adjust their investments from the default options, meaning that those funds easily collect new assets.
The proposed rule also sought to clarify that climate change can be a material factor for pension funds to consider when voting on shareholder resolutions.
The final rule is arriving at a time of political polarization on ESG, with numerous Republican-led states taking measures to limit its use in the assets they oversee. That has included steps ranging from blacklisting sustainable investment managers to considering legislation modeled on the Trump-era DOL rules.
The final version of the DOL's rule will likely be published in mid-November, Bryan McGannon, director of policy and programs for US SIF, said in an email.
This story was originally published on ESG Clarity.
By listening for what truly matters and where clients want to make a difference, advisors can avoid politics and help build more personal strategies.
JPMorgan and RBC have also welcomed ex-UBS advisors in Texas, while Steward Partners and SpirePoint make new additions in the Sun Belt.
Counsel representing Lisa Cook argued the president's pattern of publicly blasting the Fed calls the foundation for her firing into question.
The two firms violated the Advisers Act and Reg BI by making misleading statements and failing to disclose conflicts to retail and retirement plan investors, according to the regulator.
Elsewhere, two breakaway teams from Morgan Stanley and Merrill unite to form a $2 billion RIA, while a Texas-based independent merges with a Bay Area advisory practice.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.
