Republican leaders in the U.S. Senate voiced their concern over the Department of Labor’s (DOL) decision not to enforce 2020 rules for fiduciaries.
Specifically, the 2020 rules — which amended the Investment Duties regulation under the Employee Retirement Income Security Act of 1974 (ERISA) – would prevent fiduciaries from putting non-pecuniary interests, such as environmental, social, and governance (ESG) objectives, above the financial interests in retirement plan investments.
The DOL said it would not enforce either rule until there is further guidance.
“These rules have created a perception that fiduciaries are at risk if they include any environmental, social and governance factors in the financial evaluation of plan investments, and that they may need to have special justifications for even ordinary exercises of shareholder rights,” Principal Deputy Assistant Secretary for the Employee Benefits Security Administration Ali Khawar said. “We intend to conduct significantly more stakeholder outreach to determine how to craft rules that better recognize the important role that environmental, social and governance integration can play in the evaluation and management of plan investments while continuing to uphold fundamental fiduciary obligations.”
The Republicans on the Senate Banking Committee disagree.
“DOL’s refusal to enforce these rules will harm Americans’ retirement savings by allowing plan fiduciaries to sacrifice investment returns to promote non-pecuniary policy objectives like social justice, diversity quotas, and lower carbon emissions,” the GOP members wrote to the acting secretary of the DOL.
The letter was signed by Sens. Pat Toomey (R-PA), ranking member on the committee, Mike Crapo (R-ID), ranking member on the Senate Finance Committee, and Richard Burr (R-NC), ranking member of the U.S. Senate Health, Education, Labor and Pensions (HELP) Committee.
“DOL’s decision to not enforce rules that protect the retirement savings of American workers is particularly concerning because it reportedly came after Wall Street asset managers lobbied the incoming Biden administration for this outcome. Asset managers that sell ESG funds—which ‘are a growing profit center for asset managers’—stand to benefit from DOL’s decision,” they added.