EXAMINING A RANGE OF EMPLOYEE BENEFITS
AND EXECUTIVE COMPENSATION ISSUES

Anti-ESG state legislation continues to focus on public retirement plan investing and asset management. Over the last year, 18 states have proposed or adopted state legislation or regulation limiting the ability of the state government, including public retirement plans, to do business with entities that are identified as “boycotting” certain industries based on environmental, social, and governance (ESG) criteria. Since our last update, four states have either adopted or proposed legislation or other forms of regulation that would restrict ESG activities using state assets.

A group of state treasurers and state attorneys general (AG) have raised concerns that certain environmental, social, and governance (ESG) features of certain fund disclosures and other marketing collateral could create liability under state Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) and Anti-Boycott, Divestment, and Sanctions (Anti-BDS) laws. This is an issue that could impact government retirement plans and/or asset managers to public and private retirement plans.
This post serves as an update to our prior blog post analyzing the impact of this anti-ESG state legislation on public retirement plan investing.
At the same time that the federal government, through the US Department of Labor, appears to be easing retirement plan fiduciaries’ paths to considering certain environmental, social, or governance (ESG) factors in making investment decisions, some states are passing legislation that would prohibit the states from doing business with managers who invest based on ESG criteria.
The US Department of Labor (DOL) recently announced that it is seeking comment on the impact of climate change on retirement security and what actions, if any, the agency should take to protect retirement savings from such risks.
New York Governor Kathy Hochul enacted an auto-IRA law, effective October 21, which requires certain New York employers to either offer their employees a qualified retirement plan or join the state-run IRA program. The new law amends the New York’s Secure Choice Savings Program, a voluntary IRA program that has been in place since 2018 and is run by the New York State Secure Choice Savings Program Board.
Recent LawFlash publications include IRS Notice 2020-68 Provides Secure Act And Miners Act Guidance and SECURE Act: IRS Sets Amendment Deadline For IRA Providers and Addresses Other IRA Issues.
As environmental, social, and governance (ESG) considerations continue to gain traction with investors, asset managers are confronted with varying levels of regulation that they must balance with the wide array of ESG demands being made by investors. Our global investment funds team has prepared a White Paper as a regulatory framework to navigate such considerations across the United States, United Kingdom, European Union, Hong Kong, and Singapore.