Biden Administration Announces Intention to Revisit the Investment of Retirement Assets in ESG Funds

On January 20, 2021, the Biden Administration announced that it will revisit a Trump Administration DOL regulation that limited the ability of fiduciaries to invest ERISA retirement plan assets in ESG funds. For those who have been following the question of whether fiduciaries of retirement plan assets may invest plan monies in ESG funds or otherwise take non-pecuniary interests into account when making investment decisions, this back and forth will come as no surprise.  With the growing interest in the marketplace for ESG funds, this is an area of great interest to investment professionals, fund sponsors and retirement plan fiduciaries alike. The underlying issue is whether retirement plan fiduciaries are permitted by ERISA to take into account non-pecuniary interests when investing plan assets or whether ERISA requires fiduciaries to consider only the financial impact of the investment on the plan's investment returns. Historically, this issue has been a political football with Democratic administrations taking a more supportive view of the practice of allowing fiduciaries to take societal as well as financial interests into account, and Republican administrations taking a more restrictive view of this practice. Based on the Biden Administration having included this DOL regulation in the list of many climate and environmental actions to revisit, we anticipate that, in the coming months, the Biden Administration will issue guidance that will offer avenues for plan fiduciaries to invest retirement plan assets in ESG funds. Stay tuned.

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