New Biden Rule Allows Retirement Plan Administrators to Invest Clients’ Money in ESG, Even if It’s Not the Most Profitable

A new Biden Administration rule took effect Monday, allowing retirement plan administrators (fiduciaries) to base investments on Environmental, Social and Governance (ESG) goals, rather than only on the maximum financial benefit of their clients.

The U.S. Department of Labor released the final rule under the Employee Retirement Income Security Act (ERISA) to allow plan fiduciaries to consider climate change and other environmental, social, and governance (ESG) factors when they make investment decisions and when they exercise shareholder rights, including voting on shareholder resolutions and board nominations.

The Biden rule eliminates a 2020 Trump Administration rule requirement that fiduciaries consider only the monetary benefit (“pecuniary only”) to their clients when choosing investments.

The new rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” which now allows retirement account managers to commit their clients’ money to less-profitable ESG investments, argues that the Trump rule had unfairly discouraged investment in ESG. – READ MORE