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Sustainability Matters

Trump's Labor Department Really Doesn't Want You to Have ESG Options in Your 401(k) Plan

Proposed rule is based on the premise that workers’ retirement security could be compromised by investments that consider climate and other material ESG risks.

At a time when virtually the entire investment world has acknowledged that environmental, social, and governance risks and opportunities are relevant material considerations for investors, the U.S. Department of Labor has proposed a rule that would limit the ability of retirement plans to include investment funds or strategies that integrate ESG factors into their investment process. Such plans covered under ERISA include most corporate defined-benefit plans that provide a pension to beneficiaries and defined-contribution plans, such as 401(k) plans, in which plan participants choose their contribution level, direct their investments into a set of what are usually mutual fund options, and then use the proceeds during their retirement.

Let's focus on what the rule proposes for 401(k) plans.