The Loan Market Association (LMA), the Loan Syndications and Trading Association (LSTA) and the European Leveraged Finance Association (ELFA) have published an ESG questionnaire which they hope will be an industry standard for investors undertaking ESG due diligence on prospective and incumbent asset managers.
The publishing associations hope that this will simplify the due diligence
On October 30, 2020, the U.S. Department of Labor (“DOL”) released its final regulation (“Final Rule”) relating to a fiduciary’s consideration of environmental, social and governance (“ESG”) factors when making investment decisions for plans subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). In response to the proposed rule (the “Proposal”), the DOL received several thousand comments, the vast majority of which opposed the new rule. Many plan sponsors and investment professionals voiced objection to the Proposal’s antipathy towards the consideration of ESG factors. In the Final Rule, the DOL generally softened its stance toward the consideration of economic ESG factors, but retained its opposition to the consideration of non-pecuniary ESG or other non-pecuniary factors.
Continue Reading The Department of Labor’s ESG-less Final ESG Rule
On June 22, 2020, the United States Department of Labor (the “DOL”) submitted a proposed regulation (the “Proposal”) regarding the use of Environmental, Social and Governance (“ESG”) factors in selecting investments for plans subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Proposal generally cautions plan fiduciaries against considering ESG factors when making investment decisions, unless such factors are relevant to the plan’s pecuniary goals.
Interest in ESG-themed investments has surged in popularity in recent years. One 2020 survey showed that nearly 74% of global investors intend to increase their allocation to ESG-oriented ETFs. However, ESG-themed investments have also captured the attention of regulators, including the DOL. The Securities and Exchange Commission recently listed ESG investments in its list of examination priorities with respect to the accuracy and adequacy of disclosures in the marketing of such investments. In addition, President Trump issued an Executive Order on April 10, 2019, which included a section on ESG investments. The Executive Order required the DOL Secretary to complete a review of trends with respect to ERISA plan investment in the energy sector.
Continue Reading DOL Proposed Rule Urges Caution Regarding the Use of ESG Factors When Selecting Investments for ERISA Plans
Many alternative funds in recent years have included environmental, social or governance (“ESG”) considerations as part of their investment strategies. On April 23, 2018, the U.S. Department of Labor (“DOL”) issued new guidance under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) on the extent to which a plan fiduciary can consider ESG factors when making investment decisions and the use of plan assets in exercising shareholder rights.
Continue Reading New DOL Guidance May Cause ERISA Plans to Be Wary of Environmental, Social and Governance (ESG) Themed Investment Options