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Fulcrum Partners is pleased to share the following report, prepared by the Employee Benefits group at Isler Dare PC: DOL Narrows Standards for Selecting Socially Responsible Retirement Plan Investments. You may read or download the full report as a PDF here.
On April 23, 2018, the Department of Labor (“DOL”) published guidance on the extent to which retirement plan fiduciaries can take into account environmental, social, or governance (“ESG”) factors in selecting socially responsible investment funds for a retirement plan’s investment line-up. With this fourth piece of guidance issued on this topic over the last fourteen years, the DOL continues to swing the pendulum on how much weight a plan fiduciary should give to ESG factors. This most recent guidance:
- Provides a narrower rationale for permitting the use of ESG factors in selecting investment options than prior DOL guidance;
- Confirms that ESG factors can be used as a tie-breaker, but only if economic interests are the same and any collateral social benefits are not included in the economic analysis;
- Indicates that it may be imprudent in certain circumstances to follow an investment policy statement that includes the use of ESG factors; and
- Clarifies that ESG–themed investment options should not be used as a retirement plan’s qualified default investment alternative (“QDIA”).
What Your Retirement Plan Fiduciaries Should Do
- Continue to focus on investment return, risk, and fees when selecting investment options and putting the economic interests of the plan first.
- Be cautious when including ESG factors, if any, in your selection of investment funds. Do not assign any economic benefit to ESG factors apart from expected investment returns for the participants in the plan.
- Review your investment policy statement with your legal counsel and/or investment advisor to determine if any changes are needed for consistency with your plan’s investment strategy, including the appropriate discussion of ESG factors, if any.
- Review your plan’s QDIA and confirm it is not an ESG–themed investment option. If it is, thoroughly analyze whether its selection continues to be prudent under the new DOL guidance, and memorialize that decision in writing.
Read the full report to learn more.
Learn more at IslerDare.com.
Fulcrum Partners LLC
Securities offered through Valmark Securities, Inc. Member FINRA, SIPC, 130 Springside Drive, Akron, OH 44333-2431, Tel: 1-800-765-5201. Investment Advisory Services offered through Valmark Advisers, Inc., which is a SEC Registered Investment Advisor. Fulcrum Partners LLC is a separate entity from Valmark Securities, Inc. and Valmark Advisers, Inc.
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