New DOL proposals could boost ESG investing

The US Labor Department’s new proposed rule could deliver a boost to ESG investing by paving the way for fiduciaries to consider ESG in investments.

The proposal published last week means US fiduciaries could be expected to take ESG factors into account in pension investment decisions. The rule, entitled “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” comes after the Biden’s administration’s decision not to enforce rules proposed under the Trump administration which looked to limit ESG considerations in investment decisions related to retirement funds.

Ali Khawar, the acting assistant secretary for the DOL’s Employee Benefits Security Administration, has said the previous rules created a “chilling effect” on ESG investments.

“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,” Khawar said.

The proposed rule is expected to be finalized by the early part of next year.