Last month, the Department of Labor (the “Department”) issued an Interpretive Bulletin 2015-011 (the “Bulletin”) clarifying the extent to which the Employee Retirement Income Security Act of 1974 (“ERISA”) permits fiduciaries to consider environmental, social, and governance (“ESG”) factors or “economically targeted investments” (“ETIs”) in their plan investment choices. The Department noted that the terms ESG and ETI are evolving but generally described such investments as ones selected, at least in part, “because of the collateral economic or social benefits they may further in addition to their investment returns.”
Under this new guidance, plan fiduciaries should consider ESG factors when such factors reasonably impact an investment’s financial return or risk profile. In addition, the Department recognized that fiduciaries may consider ESG factors or ETIs as “tie-breakers” when deciding between investment alternatives that are otherwise equal in terms of risk and return.
Please see full publication below for more information.