ESG and Climate Change: Pension Fund Dos and Don’ts
By Randy Bauslaugh
Pension fund administrators have a fiduciary duty to prudently manage financial risks and opportunities when investing plan assets and when managing plan operations that are paid from the pension fund. This includes the financial risks and opportunities associated with climate change and other environmental, social and governance (ESG) issues. But what are the legal dos and don’ts?
Plan fiduciaries will always be on solid legal ground if they take ESG information into account for financial purposes – to protect the value of accruing pensions or to provide more cost-efficient benefits. They will be on shaky legal ground if they prioritize the use plan assets to achieve ESG impacts ahead of those financial considerations.
The current legal environment, which puts the financial interests of plan beneficiaries first, is appropriate from a policy perspective. Regulators should resist any framework that prioritizes impacts. ESG regulations beyond those adopted by Ontario and those proposed for adoption federally should be avoided.
Source @SSRN
