In late October, the Labor Department published a final rule concerning financial factors for ERISA plan investments, which means it will be in effect before the Biden administration takes the helm.
The rule stipulates that ERISA plan fiduciaries cannot invest in "non-pecuniary" vehicles that sacrifice investment returns or take on additional risk, though the final rule focused less on ESG than the proposal on which it was based.
David Levine, principal at the Groom Law Group in Washington, said the incoming administration could amend the rule at the Labor Department through a traditional notice and comment period if it so chooses, or take a more hands-off approach when it comes to enforcement. "If they don't want to enforce it, there's definitely paths forward but you have to see how far they want to go and who's in charge," he said.
Added Ms. Stapel: "I can't believe that enforcing these ESG rules would be a focus of a Biden DOL. And I do predict that there will eventually be action taken to address them in some way."
However, there's an outside chance the financial factors rule could be undone by Congress, depending on the results of two Senate runoff elections in Georgia on Jan. 5. If Democrats were to win both those races, the party would control the Senate — in addition to the House and White House — and could potentially use the Congressional Review Act. The CRA lets Congress disapprove — by a simple majority vote — a final rule issued by a federal agency if it has not been in effect for more than 60 legislative days.
But just how much attention Congress, no matter its makeup, or the Biden administration pays to these issues remains to be seen. As evidenced by the president-elect's recent statements, the COVID-19 pandemic will be his administration's top priority when taking office, Mr. Levine said. "It would not surprise me if COVID was high on their list across the government before we get to anything else," he added.
Ms. Stapel expressed a similar thought: "It's an understatement to say there's a lot going on and I just don't know that (issues like ESG investing and proxy voting are) going to register urgently even in the microcosm of the Department of Labor.
"He's walking into a burning building here. You need to prioritize what you save," she said.