More than 95% of the firms, groups and individuals who submitted comment letters or signed petitions in response to the Department of Labor's proposal on environmental, social and governance investments in ERISA plans opposed the initiative, an analysis published Thursday from several investor organizations and financial industry firms found.
The Labor Department unveiled a proposal that would likely curb ESG investments in ERISA plans by adding 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.
In the analysis, US SIF: The Forum for Sustainable and Responsible Investment, Ceres, Intentional Endowments Network, the AFL-CIO, the Interfaith Center on Corporate Responsibility, Impax Asset Management and Morningstar sifted through 8,636 comments, including signed petitions. One petition from environmental non-profit Green America had more than 7,000 signatures, making up a bulk of the comments analyzed.
There were 229 comments from investment-related groups, 94% of which were opposed, the analysis found. Moreover, no comments in support of the proposal were received from investment-related organizations, pension plans or asset owners.
One out of 86 comments from asset managers supported the proposal, while major players like BlackRock, Fidelity Investments, State Street Global Advisors, T. Rowe Price Group and Vanguard each submitted comments in opposition.
Non-investment groups, including policy advocacy groups and trade organizations, accounted for 120 comments, 37% of which were in favor. But 57% of comments from these groups were opposed and 6% were mixed/neutral, the analysis found.
The main issues stakeholders had with the proposal, which had a 30-day comment period that concluded July 30, included a lack of justification for why the rule is needed, the Labor Department's dismissal of ESG issues' financial materiality, and the improper singling out of ESG investments for a heightened level of scrutiny and restriction.
Lisa Woll, CEO of US SIF, said in a news release that the overwhelming response reflects the growing interest in and asset flows to sustainable investing, adding that professionally managed assets utilizing one or more sustainable investment strategies grew 38% from 2016-2018 to more than $12 trillion.
"Generating more hurdles to the incorporation of ESG criteria will have a chilling effect, leading to plan participants losing access to ESG options — many of which have outperformed their indices over time and especially during the market shock related to COVID-19," Ms. Woll said. "Limiting plan participant options and diversification opportunities should not be the role of the Department of Labor."