Attempts to Repeal the Current DOL Ruling Governing ERISA Plans Puts the Financial Security of Millions of Pensioners at Risk
NEW YORK, NY, WEDNESDAY, MARCH 1ST, 2023 – The Interfaith Center on Corporate Responsibility (ICCR), a coalition of over 300 institutional investors that engages with corporations on environmental, social, and governance issues, registered its strong disappointment with today’s vote by the Senate to pass a Congressional Review Act resolution seeking to repeal the Department of Labor’s recent rule regarding the fiduciary duties of ERISA funds. The same CRA passed narrowly passed in the House yesterday.
The recently enacted DOL rule overturns a 2020 rule enacted during the prior administration that essentially barred ERISA fiduciaries from considering environmental, social, and governance (ESG) factors in their management of risk. The new rule confirms that the evaluation of ESG in investment selection is consistent with fiduciary duty and acknowledges that ESG factors are no different from other material risk-return factors. It also provides helpful clarity on how plan sponsors can include ESG considerations in investment decision-making under ERISA.
Said Josh Zinner, CEO of ICCR, “This misguided CRA was introduced by Republican lawmakers with ties to the oil and gas sector who are weaponizing the rule as part of a broader campaign to vilify ESG investing as “woke”, a dog whistle for right-wing groups with a regressive social and environmental agenda. Members of Congress are playing politics with the life-savings of hard-working Americans. This irresponsible CRA could have disastrous long-term consequences for pensioners and harm our economy.”
Many environmental and social challenges such as the climate crisis present systemic risks that will have long-term economic impacts on companies, investment portfolios, and society more broadly. The DOL’s current rule recognizes that ESG factors can be particularly relevant to long-term investors, including the retirement plans of pension beneficiaries. The rule reaffirms ERISA’s longstanding principle that the duties of prudence and loyalty require ERISA plan fiduciaries to focus on relevant risk-return factors and not subordinate the interests of participants and beneficiaries by sacrificing investment returns or taking on additional investment risk.
Importantly, the DOL's recent rule eliminated harmful provisions from the 2020 rule that effectively discouraged ERISA fiduciaries from exercising their proxy voting rights. The recently enacted rule instead clarifies that “[t]he exercise of shareholder rights is important to ensuring management accountability to the shareholders that own the company.”
“We fully expect President Biden will veto this resolution,” cautioned Zinner. “Institutional investors, including pension fund managers, recognize the need to consider environmental, social, and governance factors that create systemic risks for people and planet and impact the returns of future beneficiaries. This CRA resolution and its opposition to prudent investment strategies won’t stop that train: it’s already too far down the tracks.”
About the Interfaith Center on Corporate Responsibility (ICCR)
Celebrating its 51st year, ICCR is the pioneer coalition of shareholder advocates who view the management of their investments as a catalyst for social change. Its 300-member organizations comprise faith communities, socially responsible asset managers, unions, pensions, NGOs, and other socially responsible investors with combined assets of over $4 trillion. ICCR members engage hundreds of corporations annually in an effort to foster greater corporate accountability. Visit our website www.iccr.org and follow us on Twitter, LinkedIn, and Facebook.