DOL Issues Non-Enforcement Policy for ESG and Proxy Voting Rules

Kilpatrick Townsend & Stockton LLP

As 2020 drew to a close, the Department of Labor (“DOL”) finalized a number of regulations relating to the fiduciary duties that apply to ERISA plan investments, including: (1) a final rule generally restricting fiduciaries from selecting plan investments on the basis of “non-pecuniary” factors, such as environmental, social, and corporate governance (“ESG”) factors, and specifically prohibiting the use of a qualified default investment alternative with investment objectives, goals or strategies involving any ESG factors (the “Final ESG Rule”), and (2) a final rule generally restricting plan fiduciaries from considering ESG factors in voting proxies or exercising other shareholder rights with respect to plan investments (the “Final Proxy Voting Rule”). 

When President Biden took office, he immediately issued Executive Order 13990, which directed federal agencies to reconsider any Trump Administration regulations that may be inconsistent with the public policies of promoting and protecting public health and the environment. 

In light of Executive Order 13990, the DOL has issued an indefinite non-enforcement policy with respect to both the Final ESG Rule and the Final Proxy Voting Rule. As a result, the DOL will not enforce the Final ESG Rule or Final Proxy Voting Rule or otherwise take enforcement action against fiduciaries based on these rules until the DOL publishes further guidance.  In announcing this non-enforcement policy, the DOL cited to comments that it received from stakeholders questioning, among other things, whether the DOL sufficiently considered public comments about how ESG considerations may appropriately factor into investment decisions.

Under the non-enforcement policy, ERISA plan fiduciaries will still be held to the general standards of prudence and loyalty under ERISA. In addition, the DOL’s non-enforcement policy would not necessarily affect consideration of the Final ESG Rule or Final Proxy Voting Rule with respect to a fiduciary breach claim brought by participants. 

The DOL intends to issue further guidance relating to the Final ESG Rule or Final Proxy Voting Rule but has not yet provided a timetable for this guidance. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Kilpatrick Townsend & Stockton LLP | Attorney Advertising

Written by:

Kilpatrick Townsend & Stockton LLP

Kilpatrick Townsend & Stockton LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.