The Department of Labor’s proposed rules addressing environmental, social and governance factors in selecting plan investments, as well as on fiduciary duties regarding proxy voting, could be released any day now.
After having dropped off its submission in early August in response to two Executive Orders from President Biden, the proposal apparently has cleared review by the White House’s Office of Management and Budget.
It is anticipated that the proposal(s) will revisit the Trump administration’s final rules on “Financial Factors in Selecting Plan Investments” (a.k.a. the ESG rule) and “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights.” Revision of the two widely anticipated rules has been in the works for several months now.
The submission on the OMB’s Office of Information and Regulatory Affairs is titled “Implementing Executive Orders 13990 and 14030.” One of President Biden’s first Executive Orders issued in January directed federal agencies to review existing regulations issued between Jan. 20, 2017, and Jan. 20, 2021, that may be inconsistent with or present obstacles to the promotion and protection of public health and the environment. A follow-on Executive Order issued in May specifically directed the Labor Secretary to consider publishing, by September 2021, for notice and comment a proposed rule to suspend, revise or rescind the Trump administration’s ESG and proxy voting rules.
In March, the DOL’s Employee Benefits Security Administration announced that it would not enforce the final rules, which provided a precursor on the direction the Biden administration plan to take. At the time, the DOL noted that it heard from a wide variety of stakeholders who asked whether these two final rules properly reflect the scope of fiduciaries’ duties under ERISA to act prudently and solely in the interest of plan participants and beneficiaries.
It’s not clear at this point whether the proposal will be to simply suspend the existing rules or whether the package will suspend them and propose new rules altogether. The submission to OMB was labeled as being not economically significant, while the final ESG rule issued last November was flagged as being economically significant.
