The U.S. Department of Labor on October 14, 2021 released a new Proposed Regulation (the “Proposed Regulation”) generally relating to the prudence and loyalty duties under the fiduciary rules of the Employee Retirement Income Security Act of 1974 (“ERISA”) and to the voting of proxies. The Proposed Regulation is the latest attempt to address the appropriateness of the consideration of environmental, social and governance (“ESG”) factors in connection with investment-related decisions by fiduciaries of employee benefit plans that are subject to ERISA (“Plans”). The regulatory game of ping-pong between Democratic and Republican administration regarding ESG and ERISA thus continues, with the Proposed Regulation being more open to the consideration of ESG factors than the existing regulations of the prior administration. This OnPoint explores the Proposed Regulation and its potential consequences to Plans, investment managers and investment funds.
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