Insights

DOL Will Not Enforce Final Rules on ESG Investments and Proxy Voting


On March 10, 2021, the DOL’s EBSA issued a statement explaining that it will not enforce final rules concerning ESG investments and proxy voting. The rules, entitled Financial Factors in Selecting Plan Investments and Fiduciary Duties Regarding Proxy Voting and Shareholder Rights, restricted fiduciaries’ use of nonfinancial factors (environmental, social and governance [ESG] criteria) when making certain retirement plan investment decisions and imposed certain requirements on fiduciaries concerning proxy voting and other shareholder rights, respectively. (See our prior Compliance Corner articles “DOL Finalizes Investment Duties Rules from the November 10, 2020 edition and “DOL Finalizes Rule on Shareholder Rights, Including Proxy Voting from the December 22, 2020 edition for more information about these rules).

The DOL intends to revisit both rules because the agency received feedback regarding the scope and impact of the rules, among other issues. Accordingly, the DOL will not enforce the final rules until the agency publishes further guidance. In addition, the agency will not pursue action due to a failure to comply with the investment duties rule with respect to an investment, including a Qualified Default Investment Alternative, or investment course of action or with respect to an exercise of shareholder rights. However, this statement does not prevent the DOL from enforcing any statutory requirements under ERISA.

Employers should be aware of this development. NFP will continue to monitor the status of these rules and communicate any updates accordingly.

DOL Statements Regarding Enforcement of Its Final Rules on ESG Investments and Proxy Voting by Employee Benefit Plans »