Labor Department changes rules to benefit ESG investing

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U.S. Secretary of Labor Marty Walsh introduced new rules Tuesday that he said would “help America’s workers and their families as they save for a secure retirement.” File Photo by Jemal Countess/UPI | License Photo

Nov. 22 (UPI) — The Labor Department announced new rules on Tuesday giving more leeway around the involvement of environmental, social and governance funds for 401(k) plans.

The move opens up the use of so-called ESG investing, also known as sustainable, impact or socially conscious investing, which had gained greater popularity over the years.

In 2020, the Trump administration issued rules that some said had a “chilling” effect on the uptake in workplace retirement plans, even if the ESG fund would have delivered a financial benefit.

“Today’s rule clarifies that retirement plan fiduciaries can take into account the potential financial benefits of investing in companies committed to positive environmental, social and governance actions as they help plan participants make the most of their retirement benefits,” Labor Secretary Marty Walsh said in a statement.

“Removing the prior administration’s restrictions on plan fiduciaries will help America’s workers and their families as they save for a secure retirement.”

Lisa Gomez, assistant secretary of labor for the Employee Benefits Security Administration, said the new rules clarify that businesses can “include the economic effects of climate change and other ESG considerations” when making investment choices.

“The rule announced today will make workers’ retirement savings and pensions more resilient by removing needless barriers, and ending the chilling effect created by the prior administration on considering environmental, social and governance factors in investments,” Gomez said in a statement.

She said the information “can be useful for plan investors as they make decisions about how to best grow and protect the retirement savings of America’s workers.”

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