DOL Will Not Enforce Final Rules on ESG, Proxy Voting
The federal agency will revisit the disputed regulations, enacted in the final days of the Trump administration.
The US Department of Labor (DOL) on Wednesday said it will not enforce two widely disputed final rules on proxy voting and environmental, social, and governance (ESG) investing in retirement plans subject to the Employee Retirement Income Security Act (ERISA).
The federal agency said it plans to revisit those guidelines, which were enacted in the final days of the Trump administration.
The decision comes after an executive order from President Joe Biden, who called on federal agencies to review any existing regulations that go against tackling climate change. Any rules that do not comply with the policy change should be reviewed, the order says.
Until the publication of further guidance, the department says it will not enforce either final rule or pursue enforcement actions against any plan fiduciary for failure to comply.
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On December 11, 2020, the U.S. Department of Labor (“DOL”) announced a final rule establishing a regulatory framework for private employee benefit plans’ fiduciaries to follow when they exercise shareholder rights, including proxy voting, and select and monitor proxy advisory firms.
The DOL stated that the final rule is intended to protect the interests of participants and beneficiaries by: (1) confirming that proxy voting decisions and other exercises of shareholder rights must be solely in the interest of, and for the exclusive purpose of, providing plan benefits to participants and beneficiaries considering the impact of any costs involved; (2) ensuring that plan fiduciaries not subordinate the interests of participants and beneficiaries in their retirement income or financial benefits under the plan to any non-pecuniary objective, or promote non-pecuniary benefits or goals; and (3) improving fiduciary practices