Rule would let retirement plan fiduciaries consider climate change when weighing investment decisions

The U.S. Department of Labor has proposed a rule to allow plan fiduciaries to consider climate change and other environmental, social and governance (ESG) factors when making investment decisions.

The rule would clarify the application of the fiduciary duties of prudence and loyalty under the Employee Retirement Income Security Act of 1974 when selecting plan investments and exercising shareholder rights, including proxy voting.

The Society for Human Resource Management notes the proposal applies to investments held in 401(k)s and other defined contribution plans as well as to defined benefit pension plans. Under President Joe Biden, DOL officials have maintained that climate change and other ESG factors pose financial risks that plan sponsors must take into account as prudent fiduciaries of workers’ retirement funds, SHRM says.

The public comment period on the proposal ends on Dec. 13, 2021. A DOL fact sheet on the proposal is also available, and it provides details on the changes and the procedural background for the proposal.