“US Department of Labor clarifies ERISA fiduciaries’ ability to consider ESG factors” – Principles for Responsible Investment (PRI) – October 23, 2015

On October 23, 2015 the United Nations Principles for Responsible Investment (PRI) reported that “(t)he US Department of Labor has released a new Interpretive Bulletin (IB 2015-01) on Economically Targeted Investments (ETIs) and Investment Strategies that Consider Environmental, Social and Governance (ESG) Factors, to:

  • “acknowledge that environmental, social and governance factors may have a direct relationship to the economic and financial value of an investment, and when they do these factors are proper components of the fiduciary’s analysis”;
  • “confirm that fiduciaries may not accept lower expected returns or take on greater risks in order to secure collateral benefits, but may take such benefits into account as “tie-breakers” when investments are otherwise equal”.Crucially, the Interpretive Bulletin says of investments that consider ESG factors: “When a fiduciary prudently concludes that such an investment is justified based solely on the economic merits of the investment, there is no need to evaluate collateral goals as tie-breakers”.

You may read more about this groundbreaking regulatory development on the news page of the PRI internet site.