Don’t Call It ESG: The Department of Labor’s New Financial Factors Regulations and Their Impact on ESG Investing and ERISA Fiduciary Duties More Broadly

The US Department of Labor (DOL) issued final regulations in November addressing whether and how ERISA fiduciaries may consider “non-pecuniary” factors in investment decisionmaking. These regulations have colloquially been referred to as the “ESG regulations,” though the text of the final regulations does not actually use the terms “environmental, social, and governance” or “ESG.” The regulations transcend ESG and address “pecuniary” and “non-pecuniary” factors—which could have a broader impact on ERISA’s fiduciary duties. Simultaneously, the DOL has been conducting enforcement examinations of how ERISA fiduciaries currently use ESG in plan investing.

The regulations will become effective before Inauguration Day and, practically speaking, are not going away any time soon. This presentation will review the new regulations and the DOL’s enforcement examinations, and address how ERISA plan fiduciaries may want to approach the regulations. We will also consider the potential impact of the incoming Biden administration’s DOL on the regulations and enforcement actions.