U.S. Department of Labor Proposes ESG-Related Updates to the ERISA Investment Duties Regulation

Proposal Would Permit ERISA Pension Plan Fiduciaries to Consider Climate Change and Other ESG Factors When Selecting Investments and Exercising Shareholder Rights Sullivan & Cromwell LLP - October 19, 2021

On October 13, 2021, the U.S. Department of Labor (“DOL”) announced a proposed rulemaking to amend the Investment Duties regulation under Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”) that would clarify the application of ERISA’s plan fiduciary duties of prudence and loyalty to selecting investments and investment courses of action, including selecting qualified default investment alternatives (“QDIAs”), and to exercising shareholder rights, including proxy voting. While the proposal retains the core principle that the duties of prudence and loyalty require ERISA fiduciaries to focus on material risk-return factors, the proposal is intended to remove barriers implemented by the prior administration that the DOL believes limited fiduciaries’ ability to consider climate change and other ESG matters as factors when selecting investments and exercising shareholder rights. Title I governs private pension plans.