US Department of Labor proposes rule to remove barriers to considering environmental, social, governance factors in plan management

WASHINGTON ­– The U.S. Department of Labor today announced a proposed rule that would remove barriers to plan fiduciaries’ ability to consider climate change and other environmental, social and governance factors when they select investments and exercise shareholder rights.

The proposed rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” follows Executive Order 14030, signed by President Biden on May 20, 2021. The order directs the federal government to implement policies to help safeguard the financial security of America’s families, businesses and workers from climate-related financial risk that may threaten the life savings and pensions of U.S. workers and families.

“The proposed rule announced today will bolster the resilience of workers’ retirement savings and pensions by removing the artificial impediments – and chilling effect on environmental, social and governance investments – caused by the prior administration’s rules,” said Acting Assistant Secretary for the Employee Benefits Security Administration Ali Khawar. “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.”

The NPRM’s comment period will run for 60 days after publication in the Federal Register and will include instructions on submitting comments through www.regulations.gov. Commenters are free to express views not only on the provisions of the proposal but also on any issues germane to the subject matter of the proposal.