Federal Dept. Of Labor Issues Final Rule On ESG Investments

Last Monday, the federal Department of Labor issued a final rule regarding environmental, social, or governance (ESG) investments for retirement plans.

Originally proposed in June, the final rule limits the ability of financial advisors managing private pension plans covered by the Employee Retirement Income Security Act of 1974 to make ESG-motivated investments, and only allows investments “based solely on financial considerations relevant to the risk-adjusted economic value of a particular investment or investment court of action.”

The June proposed rule received more than 8,700 comments, the majority of which were negative. Large investment firms, such as BlackRock, Fidelity, and Vanguard, also reacted negatively to the rule.

Investment firms have also argued this will prevent them from considering the effects of climate change when making investment decisions.

The rule has not yet been published in the Federal Register.

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