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(Heartland in the News) DOL Plan to Limit ESG in 401(k)s Draws Growing Opposition

Opposition to the Labor Department’s proposal to limit environmental, social and governance focused investments in 401(k) plans is growing, along with requests for a longer comment period. Morningstar, Heartland Capital Strategies, Principles for Responsible Investment and Institutional Shareholder Services (ISS) have written comment letters opposing the proposal along with 41 Democratic members of the House, 13 Democratic members of the Senate and others. In addition, a coalition of trade groups representing financial institutions with business in the defined contribution space are asking Labor for a 30-day extension to the public comment period on the proposal that is scheduled to end on J

House Dems Diss DOL’s ESG Proposal

Pushback on the Labor Department’s ESG proposal continues—this time in a letter from about 40 Democrats in the House of Representatives. The July 20 letter to Secretary of Labor Eugene Scalia, signed by Reps. Brendan Boyle (D-PA-02), Andy Levin (D-MI-09) and Susan DelBene (D-WA-01) and cosigned by three dozen of their counterparts in the House, states that the proposed rule “drastically shifts the landscape of responsible, social investing and cuts at the freedom of private entities to invest based on their individualized priorities.” Moreover, the authors state that “by preventing entities governed by the Employee Retirement Income Security Act (ERISA) from investing with ESG principles, th

David Keto and SRI Group's Letter to the DOL

SRI Group 1629 K Street, NW, Suite 300 Washington, DC 20006 July 17, 2020 Office of Regulations and Interpretations Employee Benefits Security Administration Room N-5655 200 US Department of Labor 200 Constitution Avenue NW Washington, DC 20210 RE: Proposed Rule on Financial Factors in Selecting Plan Investments (RIN 1210-AB95) Dear Employee Benefits Security Administration: I write in strong opposition to the Department of Labor’s proposed rule, “Financial Factors in Selecting Plan Investments” (RIN 1210-AB95) (the “Proposal”). I serve as Managing Principal of SRI Group LLC, a consultancy focused on responsible investing in retirement plans. Prior to SRI Group, I served as an ERISA fiduci

Recurring Feature: Responsible Investor Aviators Answer 7 Questions

Please tell us about your institution, and how you began moving toward responsible investment and/or good corporate governance? Federated Hermes has for several decades sought to act responsibly and deliver holistic returns in order to ensure a better place for our beneficiaries when they retire. How did you get personally become interested in the capital markets, pension fund world and progressive responsible investment and/or corporate governance? Emboldened by the wonderful experience at the 67 acre regeneration scheme at King’s Cross-London over the past ten years I have sought to apply lessons learned into other city centre regeneration schemes which can deliver positive societal an

Senate Democrats ask DOL to back off ESG rule

The proposed restrictions on environmental, social and governance funds in 401(k)s would perpetuate racial discrimination, a group of lawmakers wrote Senate Democrats took aim this week at the DOL’s recently proposed ESG rule, crying foul over the racial implications it poses. In a letter July 15 to Labor Secretary Eugene Scalia, the group of 13 senators wrote that the proposed restrictions on investments that use environmental, social and governance criteria “would discourage financial advisers from supporting racial justice.” “Racial justice, corporate diversity and other ESG factors are increasingly a consideration in investment decisions,” the letter read. “Further, contrary to the skept

Background and Information on DOL Rulemaking (look for ou

Heartland Capital Network Briefing Package on DOL Rulemaking on Financial Factors in Selecting Plan Investments Overview The US Department of Labor has issued proposed new regulations implementing the Employee Retirement Income Security Act of 1974 (ERISA) that would discourage and, in some cases, effectively prohibit responsible investment in US retirement plans. The proposed rulemaking was issued on June 30, 2020, with a public comment period ending on July 30, 2020. The proposed rulemaking, with the DOL’s commentary, is available at: https://www.federalregister.gov/documents/2020/06/30/2020-13705/financial-factors-in-selecting-plan-investments This briefing package provides background on

Sample Letter to the DOL

Sample Comment Letter to the US Department of Labor [LETTERHEAD] July XX, 2020 Office of Regulations and Interpretations Employee Benefits Security Administration Room N-5655 200 US Department of Labor 200 Constitution Avenue NW Washington, DC 20210 RE: Proposed rule on Financial Factors in Selecting Plan Investments (RIN 1210-AB95) Dear Employee Benefits Security Administration: I write in strong opposition to the Department of Labor’s proposed rule, “Financial Factors in Selecting Plan Investments” (RIN 1210-AB95) (the “Proposal”). [insert paragraph about your organization and its experience relevant to investments, including ESG investments.] The Proposal seeks to up-end decades of preced

DOL Proposes New Rules Regulating ESG Investments

Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton, David M. Silk, David E. Kahan, Sabastian V. Niles, Alicia C. McCarthy, and Carmen X. W. Lu. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here) and Reconciling Fiduciary Duty and Social Conscience: The Law and Economics of ESG Investing by a Trustee by Robert H. Sitkoff (discussed on the Forum here). As ESG investing continues to ac

Death by Paperwork? ESG Investing Probe Hints at Onerous Pile-On

A series of form letters sent to retirement plans hint at how the Labor Department may enforce a new requirement that sponsors justify socially conscious investments. One such letter obtained by Bloomberg Law presses plan administrators to provide 13 types of supporting documents, including: the names, addresses, and duties of those responsible for making investment decisions, proxy voting policies, and myriad financial statements associated with the plan design. The letters predate a proposed rule by the Employee Benefits Security Administration, which would require sponsors to fully document their reasoning for investing in environmental, social, and corporate governance (ESG)-focused fund

DOL proposal could chill the use of ESG in retirement funds

The agency argued a fiduciary responsibility involves focusing solely on returns for participants A Department of Labor proposal that would reform investment selection rules for retirement accounts could chill the use of socially responsible investments in them, experts said Wednesday. Tuesday night, the DOL published for public comment a proposal to update and clarify its investment duties regulation for employer-sponsored retirement plans, such as 401(k)s, that are governed by the Employee Retirement Income Security Act. It emphasizes that a retirement plan must focus on financial returns for participants. The DOL said in a press release that its motivation was to “provide clear regulatory

PRI DOL Submission Template

Office of Regulations and Interpretations Employee Benefits Security Administration Room N-5655 U.S. Department of Labor 200 Constitution Avenue NW Washington, DC 20210 Re: Financial Factors in Selecting Plan Investments Proposed Regulation (RIN 1210-AB95) Dear Director Canary: On behalf of [Insert name of your organization], thank you for the opportunity to submit comments on the notice of proposed rulemaking entitled “Financial Factors in Selecting Plan Investments” (“Proposal” or “NPR”). [Insert name of your organization] is committed to integrating environmental, social and governance (ESG) factors into our investment activities because we believe that ESG integration is essential t

Key Senator Knocks DOL ESG Proposal

The Department of Labor’s proposed regulation clarifying investment duties of ERISA plan fiduciaries in relation to environmental, social and governance (ESG) investing is already drawing fire from Sen. Patty Murray (D-WA). Murray, ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee which has primary jurisdiction over ERISA-related issues, argues that the proposed rule would discourage financial advisors from considering ESG criteria and ignores findings that show ESG investments outperform traditional investments. “We know that by focusing on the ‘triple bottom line’—profits, people, and the planet—financial advisors can, and already do, help their clients do

The Labor Department Steps Backward

Expresso Editor’s Note: The US Department of Labor's (DOL) proposed rulemaking "Financial Factors in Selecting Plan Investments" was published in today's Federal Register. Accordingly, the comment period is scheduled to end on July 30, 2020. Comments may be submitted electronically at https://www.regulations.gov/document?D=EBSA_FRDOC_0001-0210 . The Heartland Network will be working to generate letters to the DOL during the 30-day comment period to oppose this kneejerk reaction. We support the AFL-CIO’s demands that DOL extend the period to 120 days, so that working people can have their voices heard during this pandemic and economic crisis. The US DOL has proposed a rule change designed

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