New Labor Dept. Guidance Opens Social Good Investing to Pensions
The move comes after a three-year campaign from the RFK Human Rights Compass program.
(January 6, 2017 | New York) The U.S. Department of Labor has finally opened the door for pension funds to engage in environmental, social and governance (ESG) investing after a three-year campaign from the Robert F. Kennedy Human Rights Compass program.
Labor Secretary Tom Perez announced new guidance allowing employee benefit plans to consider ESG factors in their investments without violating the law on Thursday.
The change comes after Robert F. Kennedy Human Rights joined a growing number of industry advocates to call for a modernization of pension investment rules. RFK Human Rights argued that guidance prioritizing investment return over ESG was out of step with current investment practice, and dissuaded fiduciaries from exercising shareholder rights in areas increasingly recognized as beneficial to long-term shareholder value.
The DOL’s updated bulletin restores the ability of pension funds to engage in proxy voting and shareholder activism - activities sharply restricted under previous labor guidelines.
“Plan fiduciaries can often enhance and protect the interest of plan participants and beneficiaries by responsibly exercising their rights as shareholders,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi. “This guidance removes perceived impediments to the prudent management of plans’ rights as shareholders.”
Today’s release reinstates earlier guidance, IB 94-2, with key updates, and will better assist plan fiduciaries in understanding and satisfying their obligations under the Employee Retirement Income Security Act with respect to proxy voting and shareholder engagement.
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About Robert F. Kennedy Human Rights Compass
The Robert F. Kennedy Human Rights Compass program works with institutional investors and other key allocators to discuss new approaches to investing that consider human rights, the environment and good governance, enlisting the private sector’s influence in the cause of justice. Compass a RFK Human Rights program engaged in social activism under the Robert F. Kennedy Human Rights organization.