US considers restricting ESG in pensions
The US Department of Labor (DOL) is considering imposing strict rules on how pension funds invest, which could see the scope for ethical and responsible investing limited.
The DOL has proposed an amendment to the Employee Retirement Income Security Act 1974 (ERISA) “to confirm that ERISA requires plan fiduciaries to select investments and investment courses of action based solely on financial considerations relevant to the risk adjusted economic value of a particular investment or investment course of action.”
The proposal appears to be similar to the sole purpose test which is in place for Australian superannuation funds.
The sole purpose test requires each trustee of a super fund to ensure the fund is maintained solely for the provision of benefits for each member for their retirement.
However, in the explanatory background to the proposal the US DOL addresses environmental, social and governance (ESG) investing of pension fund assets specifically.
It referred back to findings the DOL made in 2018 on the relationship between ESG considerations and investment considerations.
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