US SIF: ESG Funds in ERISA plans and as QDIA

© Luke Michael

Last week the US SIF Foundation released a new guide with details on five steps for DC plan sponsors. The guide also included more information how ESG funds can be included in ERISA plans and used as QDIA or qualified default investment alternative.

The Forum for Sustainable and Responsible Investment released a statement from Lisa Woll, CEO, on the Department of Labor (DOL) proposed rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights.”

“Today’s announcement is an important step towards ending the regulatory pendulum that is holding back the inclusion of funds utilizing ESG criteria in retirement plans and complicating proxy voting by plan fiduciaries.

“The proposal recognizes that the consideration of ESG criteria is part of the investment process and should be treated like any other investment criteria used by plan fiduciaries under the duty of loyalty and care.

“Significantly, the proposal removes the artificial barriers created by the 2020 rules for ESG consideration in default plans, or Qualified Default Investment Alternatives (QDIAs).

“The proposal also recognizes the proxy vote as an ownership right and removes provisions that may have discouraged fiduciaries from exercising their ownership rights.

“We appreciate the work done by DOL to address the damage done by the previous administration and to ensure that ERISA fiduciaries have new rules for the road.  The proposed guidance should help address the gap between the growth of sustainable investment overall and the much more limited growth of sustainable investment in retirement plans. We look forward to working with DOL on a final rule.”



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