Page 18 - Investment Advisor - October 2021

ESG HORIZONS

By Melanie Waddell and Bernice Napach

DOL Rules on ESG Investments Land at OMB

Also, over at the SEC, Chairman Gary Gensler is asking for better
information on ESG criteria definitions.

he Labor Department has sent of further guidance, the department will
its proposed rules related to not enforce either final rule or oth-
Tenvironmental, social or gov- erwise pursue enforcement actions
ernance factors in retirement plan against any plan fiduciary based on a
accounts to the Office of Management failure to comply with those final rules.”
and Budget for review. Labor’s plan OMB reviews typically take 90 days.
complies with an executive order issued Once OMB approves the plan, Labor
by President Joe Biden in May that will issue it for public comment.
directs the secretary of labor “to con- “This is an important priority for
sider publishing by Sept. 2021” pro- the administration,” attorney George
posed rules related to ESG investments Michael Gerstein with Stradley Ronon
in retirement accounts. ed shareholder proposals. Those rules in Washington told Investment Advisor
The plan by Labor’s Employee were approved by the Trump admin- in an August email. So timing for release
Benefits Security Administration seeks istration last October after an unusu- of EBSA’s plan “can be unpredictable.”
to either suspend, revise or rescind ally short comment period that attracted Gerstein said that he’s expecting Labor’s
agency rules that limited investments opposition from many financial firms. rules to provide “greater clarity on the
focused on ESG factors in retirement The Biden Labor Department aban- need to consider ESG factors that are
plan accounts and limited plan fiducia- doned the Trump-era rules in March, material to investment performance as a
ries from voting in favor of climate-relat- announcing that “until the publication matter of prudence.”

SEC Mulls More Disclosure for ESG Funds Sustainable and Responsible Investment
According to The Forum for

he Securities and Exchange minimal greenhouse gas emissions from (US SIF), there were 836 sustainable
TCommission, concerned about the their corporate assets, using terms like funds with $3.10 trillion in assets in the
lack of clarity in the sustainable investing “green” or “sustainable’” — usually with- U.S. at the end of 2020.
fund universe, is considering requiring out providing the criteria and data that Gensler also asked staff to consider
more disclosure about the criteria and underlie those terms and assertions. ways for the asset management industry
data funds use as well as new naming Thus, he is directing staff to consider to enhance transparency about diver-
conventions. According to a Bloomberg recommendations about whether fund sity at the board and senior manage-
report, the SEC already has taken actions managers should disclose the criteria ment level, which may be a first step to
on funds to define terms they use. and underlying data they use and study improving diversity in the industry. Such
“When it comes to sustainability- current naming conventions for funds, disclosure could include aggregated
related investing … there’s currently a which are largely based on investment demographic data about a firm’s employ-
huge range of what asset managers might types rather than investment strategies. ees and owners and about its diversity
mean by certain terms or what criteria “It may well be a distinction without a and inclusion practices in hiring.
they use,” SEC Chairman Gary Gensler meaningful difference,” Gensler said of The AMAC also recommended that
said in July before an Asset Management current naming conventions. the commission clarify the variety of
Advisory Committee meeting. He said updates to fund disclosures and factors that fiduciaries can use when
He described the variety of investment to naming conventions “could bring need- selecting asset managers, beyond AUM
approaches used by funds and the asser- ed transparency to the asset management and length of track record, criteria that
tions they make — screening out industries industry, particularly in light of the sig- often eliminates firms owned by women
such as fossil fuels and tobacco, claiming nificant growth in the sustainability area.” and people of color.

16 INVESTMENT ADVISOR OCTOBER 2021 | ThinkAdvisor.com