The U.S. Department of Labor (DOL) published a proposed regulation on October 14, 2021, that would clarify how fiduciaries of private sector employee benefit plans should apply ERISA’s fiduciary duties of prudence and loyalty when making investment decisions and exercising shareholder rights. In part, the DOL’s changes to its “Investment Duties” regulation (29 C.F.R. § 2550.404a-1) would expand whether and how plan fiduciaries may consider environmental, social, and governance (ESG) factors when managing and selecting plan investments. The DOL has solicited public comments in a number of places in the proposed regulation, with comments due by December 13, 2021.

The proposed regulation follows closely on the heels of two sets of final regulations issued by the DOL late last year. The first, “Financial Factors in Selecting Plan Investments” (published November 13, 2020), adopted amendments to the Investment Duties regulation and generally required plan fiduciaries to select investments and investment courses of action based solely on consideration of “pecuniary factors.” On December 16, 2020, the DOL published the second final regulation, “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights,” which also adopted amendments to the Investment Duties regulation by expanding the obligations of plan fiduciaries when exercising shareholder rights, including proxy voting.

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