A U.S. Department of Labor recently announced a final rule allowing retirement planners to factor climate change in investment decisions.
The final rule titled "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights," was announced in a Nov. 22 news release.
"Today's rule clarifies that retirement plan fiduciaries can take into account the potential financial benefits of investing in companies committed to positive environmental, social and governance actions as they help plan participants make the most of their retirement benefits," Labor Secretary Marty Walsh said in the news release. "Removing the prior administration's restrictions on plan fiduciaries will help America's workers and their families as they save for a secure retirement."
The final rule, first proposed in October of last year, allows retirement plan fiduciaries, including 401(k) plan sponsors, to consider climate change and other environmental, social and governance factors while selecting investment options. That consideration also can occur while exercising shareholder rights, including proxy voting for in-plan securities, according to the release.
The final rule came following "extensive consultations and feedback" from stakeholders. DOL ''concluded that two rules issued in 2020 during the prior administration unnecessarily restrained plan fiduciaries' ability to weigh environmental, social and governance factors when choosing investments, even when those factors would benefit plan participants financially," the news release said.
The final rule also follows President Joe Biden's Executive Order 14030, issued in May of last year, which directed federal agencies to identify and assess policies that will protect the life savings and pensions of U.S. workers and and their families from climate-related financial risks. The final rule will shield workers from those risks, DOL Assistant Secretary for Employee Benefits Security Lisa M. Gomez said in the news release.
"The rule announced today will make workers’ retirement savings and pensions more resilient by removing needless barriers and ending the chilling effect created by the prior administration on considering environmental, social and governance factors in investments," Gomez said in the release. "Climate change and other environmental, social and governance factors can be useful for plan investors as they make decisions about how to best grow and protect the retirement savings of America’s workers."
