There has been a long, confusing trail of regulatory and sub-regulatory guidance issued by the U.S. Department of Labor (DOL) dealing with the standards that plan fiduciaries must meet when selecting socially conscientious investments for their retirement plan (i.e., so-called ESG investments). Most recently, the Biden administration issued final regulations to address the “chilling effect” that prior guidance had on a fiduciary’s ability to consider social factors. Although these new regulations appear to make it easier for plan fiduciaries to invest plan assets in ESG funds, risks still lurk. Plan fiduciaries should work with their ERISA counsel to understand the totality of the guidance and the risks before investing plan assets in an ESG investment.
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