The Labor Department cleared the path for employers to consider environmental, social, and governance principles when choosing investment funds for their 401(k) plans.
The move, which was announced on Tuesday, rolls back restrictions put in place during the Trump administration that made ESG considerations more challenging for employers. The final rule on the matter will take effect in 60 days.The change is part of a broader push in favor of the ESG movement that has pleased Democrats and earned derision from Republicans.
“Today’s rule clarifies that retirement plan fiduciaries can take into account the potential financial benefits of investing in companies committed to positive environmental, social, and governance actions as they help plan participants make the most of their retirement benefits,” Labor Secretary Marty Walsh said.
The change is welcome news for those involved in pushing for ESG investing, which includes major financial institutions such as BlackRock. Other agencies, including the Securities and Exchange Commission, have also pitched rules aimed at expanding the ESG movement. Republicans have been fighting against the growing wave of ESG investing. They contend that the concept runs counter to the most fundamental tenet of investing, which is to return value. Opponents of ESG contend that it uses finance as a vehicle to achieve political ends rather than simply making the biggest gains possible.
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