Skip to main content
MENU
Subscribe
  • Login
  • My Account
  • Logout
  • Register For Free
  • Subscribe
  • Topics
    • Alternatives
    • Artificial Intelligence
    • CIOs
    • Consultants
    • Defined Contribution
    • ESG
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Private Credit
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • Special Reports
    • Washington
    • White Papers
  • International
    • U.K.
    • Canada
    • Europe
    • Asia
    • Australia - New Zealand
    • Middle East
    • Latin America
    • Africa
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Influential Women in Institutional Investing 2024
    • Eddy Awards
  • Resource Guides
    • Active Thematic Global Equities
    • Retirement Income
    • Fixed Income
    • Pension Risk Transfer
    • Pooled Employer Plans (PEPs)
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • ESG Rated ETFs
    • Divestment Database
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • DC Plan Design: Improving Participant Outcomes
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
  • Print
Breadcrumb
  1. Home
  2. ESG
August 14, 2020 12:27 PM

DOL investigates use of ESG funds in retirement plan lineups

Margarida Correia
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Eugene Scalia, U.S. secretary of labor, speaks during a Senate Finance Committee hearing in Washington on June 9, 2020.
    Bloomberg

    Labor Secretary Eugene Scalia has said pension funds 'are not vehicles for furthering social goals or policy objectives that are not in the financial interest of the plan.'


    The Department of Labor is cracking down on plan sponsors that use environmental, social and governance-themed funds as investment options in their retirement plans.

    In an enforcement letter sent to plan sponsors with ESG funds in their plan lineups, the agency requested a slew of documents, including materials showing the "names, addresses and responsibilities of all persons or entities with responsibility for making investment decisions."

    A sample letter viewed by Pensions & Investments gives the plan sponsor two weeks to provide the requested materials for a three-year period beginning Jan. 1, 2017. The letter was dated May 5.

    "The Department seeks to better understand the plan fiduciaries' selection of ESG funds for inclusion in the plan's investment options and compliance with their duty to administer the plan prudently and solely for the purpose of providing benefits to participants and beneficiaries, and defraying reasonable expenses of administering the plan," said Thomas Licetti, the New York regional office director for the Employee Benefits Security Administration of the Labor Department, in the letter.

    Other requested materials include investment policies and procedures, proxy voting materials, meeting notes and "portfolio statements for any investment holdings included in the plan's portfolio in whole or in part based on the consideration of ESG factors." It also requests prohibited transaction exemptions relied on for the plan's investment in proprietary funds.

    The department also sent letters to registered investment adviser firms and other service providers for the affected plan sponsors. The letters are reported to have gone out in waves from different regional offices, according to Michael L. Hadley, a partner with law firm Davis & Harman who specializes in employee benefits and ERISA.

    The inquiry reinforces a controversial proposal issued in June that many industry observers say will curb ESG investing in ERISA plans.

    The proposal adds regulatory text that makes clear that ERISA requires plan fiduciaries in both private defined benefit and defined contribution plans to select investments "based on financial considerations relevant to the risk-adjusted economic value of a particular investment or investment course of action."

    Critics of the proposal chided the agency's latest enforcement move. "The request suggests unwarranted skepticism by the DOL about environmental, social and governance issues. A growing body of research indicates E, S and G factors can be material to value creation and help mitigate risk in investing," said Amy Borrus, executive director of the Council of Institutional Investors, in an email.

    Will Hansen, executive director of the Plan Sponsor Council of America, also attacked the Labor Department's probe. "We remain concerned that this nationwide investigative program could hinder plan participant fund options as well as decrease retirement savings if an ESG-type fund is not an available fund option within the retirement plan. This type of investigation on top of the recent rule-making from the DOL may cause a plan sponsor to not provide an ESG fund in the fund lineup."

    Despite strong opposition, the Labor Department defends the proposal, saying that fiduciaries must discharge their duties "solely in the interest" and "for the exclusive purpose" of providing benefits to participants and their beneficiaries.

    "Private employer-sponsored retirement plans are not vehicles for furthering social goals or policy objectives that are not in the financial interest of the plan," Labor Secretary Eugene Scalia said in a news release after the proposal was unveiled. "Rather, ERISA plans should be managed with unwavering focus on a single, very important social goal: providing for the retirement security of American workers."

    Related Articles
    DOL proposal reinforces fiduciary role in ESG investing
    DOL proposal could chill prospects for ESG in ERISA plans
    Industry sounds off against DOL proposal on ESG
    Labor Department on wrong side of latest ESG debate
    Recommended for You
    Headshot of David Atkin
    Principles for Responsible Investment begins CEO search as David Atkin plans to step down
    Stacked blocks that have DEI on the side and Diversity, Equity and Inclusion written on the front.
    DEI on pause, but sources confident all is not lost
    esg
    Hedge funds seek out ways to navigate Trump’s anticlimate agenda
    Sponsored
    White Papers
    The State of Lifetime Income Report
    The Next Wave of LDI Evolution
    Retirement security to future income wins, TIAA brings you the latest financial…
    U.S. Public Funds Top Performers: Q2 2024
    Generative AI Investing: Opportunities at a Key Tech Inflection Point
    Research for Institutional Money Management: Advancing Physical Risk Modelling,…
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    October 23, 2023 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Custom Content
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2025. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Artificial Intelligence
      • CIOs
      • Consultants
      • Defined Contribution
      • ESG
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Private Credit
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • Special Reports
      • Washington
      • White Papers
    • International
      • U.K.
      • Canada
      • Europe
      • Asia
      • Australia - New Zealand
      • Middle East
      • Latin America
      • Africa
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Influential Women in Institutional Investing 2024
      • Eddy Awards
    • Resource Guides
      • Active Thematic Global Equities
      • Retirement Income
      • Fixed Income
      • Pension Risk Transfer
      • Pooled Employer Plans (PEPs)
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • ESG Rated ETFs
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • DC Plan Design: Improving Participant Outcomes
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
    • Print