Something to Get ESGcited About? DOL Finalizes ESG- and Proxy-Related Rules

The U.S. Department of Labor on December 1, 2022, released a new final regulation (the “Final Regulation”) generally relating to certain aspects of 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 under ERISA. The Final Regulation, which follows a proposed regulation released on October 13, 2021, 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 Final Regulation also follows a Trump Administration set of final regulations on prudence and another set addressing proxy voting. The release of the Final Regulation, focused as it is on ESG, is a major development, and by transcending ERISA-centric concerns, has received broad coverage and significant attention from the mainstream press, politicians and others inside and outside of the United States who are not ERISA practitioners. This OnPoint (and accompanying chart) discusses some of the material impacts of the Final Regulation on Plans, fiduciaries and the market generally.