DOL Finalized Rule Continues to Impose Limitations on the Use of ESG Considerations (and Other Non-Pecuniary Factors) in Selecting ERISA Plan Investments
On October 30, 2020, the Department of Labor (“DOL”) issued a final rule (the “Final Rule”) clarifying its position on when and how plan fiduciaries may consider non-pecuniary factors, such as environmental, social and governance (“ESG”) factors, in making investment decisions under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Final Rule, which amends a regulation from 1979, is similar to the rule that the DOL proposed on June 23, 2020, with the main difference being that the DOL removed all references to ESG and instead focused more broadly on a fiduciary’s consideration of pecuniary versus non-pecuniary factors under a duty of loyalty. In short, the Final Rule requires that fiduciaries evaluate and select investments based on pecuniary factors and only allows consideration of non-pecuniary factors, such as ESG, in the rare circumstance where all else is equal.