The Biden administration will fail to enforce two Trump-era rules that include retirement plans, including one that is effective discouraged administrators for these plans from selecting investments from an environmental, social and governance point of view to the Ministry of Labor said on Wednesday.
The second rule stipulated that pension plan administrators should act as trustees and act solely in the interests of the plan participants – Examine a complex list of principles before voting proxies on proposals from shareholders that may have prevented plans from voting as a whole. When trustees have chosen to vote and the rule makes it clear that it is not required, they are only allowed to support causes and goals in the financial interest of the plan.
Both regulations, finalized by the Trump administration late last year and taking effect in January, will be rewritten and formally proposed in the coming months.
“These rules have created a perception that trustees are at risk if they incorporate environmental, social and governance factors into the financial evaluation of plan investments,” Ali Khawar, assistant chief secretary with the security administration for employee benefits, said in a statement . The rules also made it appear that pension plan sponsors must have “special justifications for even ordinary exercise of shareholder rights,” said Khawar.
The Ministry of Labor has already met with a variety of stakeholders on these issues, including asset managers, working groups, plan sponsors and consumer advocates, Khawar said in an interview. And when he got away from those meetings, he said the rules had a “chilling effect” on the use of so-called ESG factors in investment decisions and the exercise of shareholder rights.
“In a number of cases there have been tremendous concerns about their being able to participate in these activities even if they were involved in activities that these rules should specifically allow,” he said.
The Agency plans to continue these discussions as it formulates new rules and will update theirs website As more information became available, Mr Khawar said.