Gov't Retirement Plans Should Approach ESG Cautiously

Law360 (September 9, 2020, 5:18 PM EDT) -- Although investment funds employing environmental, social and governance, or ESG, strategies are gaining in popularity, the U.S. Department of Labor has long been hostile to them.

Since 1994, the DOL has emphasized that fiduciaries of Employee Retirement Income Security Act plans are prohibited from making investment decisions on the basis of any factor other than the economic interest of their plan. As a result, fiduciaries are not permitted to sacrifice investment returns or take on additional risk as a means of using plan investments to promote societal policy goals.

In June 2020, the department doubled down on its enmity to ESG...

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