The proposal unveiled Oct. 13 would remove the special rules for QDIAs that apply under the Trump administration rule.
On proxy voting, the proposed rule would make changes to the Trump administration's rule that was finalized in December 2020 and took effect Jan. 15. Specifically, the proposal would eliminate the statement in the current regulation that "the fiduciary duty to manage shareholder rights appurtenant to shares of stock does not require the voting of every proxy or the exercise of every shareholder right."
Mr. Khawar said voting proxies are a part of a fiduciary's core responsibilities. "The bias that the previous administration's rules created was to really favor not voting and not taking action," he said. "But these are assets that are owned by participants and beneficiaries, and the obligations that fiduciaries have in other contexts don't stop when you're talking about proxy voting."
In March, the Labor Department said it would not enforce either of the Trump administration's rules, but investor confusion has persisted.
"The department has also heard from stakeholders that the current regulation, and investor confusion about it, including whether climate change and other ESG factors may be treated as 'pecuniary' factors under the regulation, has already had a chilling effect on appropriate integration of climate change and other ESG factors in investment decisions, which has continued through the current non-enforcement period, including in circumstances that the current regulation may in fact allow," the Labor Department said in its rule proposal.
A 60-day comment period began upon publication in the Federal Register Oct. 14.
A variety of stakeholders welcomed the proposal.
"We appreciate the work done by DOL to address the damage done by the previous administration and to ensure that ERISA fiduciaries have new rules for the road," said Lisa Woll, CEO of Washington-based US SIF: The Forum for Sustainable and Responsible Investment, in a statement. "The proposed guidance should help address the gap between the growth of sustainable investment overall and the much more limited growth of sustainable investment in retirement plans."
Jim Roach, senior vice president, head of distribution-ESG target-date fund at Boston-based Natixis Investment Managers, said in a statement that "ESG investing is clearly here to stay, and we believe this newly proposed DOL rule addresses a demand of increasing importance to investors."