NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, April 30, 2018

By Emily Chasan

The Trump administration unveiled guidance aimed at the burgeoning socially-responsible investment industry that left some investors scratching their heads.

The Department of Labor, which oversees retirement-plan funds, published guidelines on Monday that said investments based on environmental, social and governance issues aren’t always a “prudent choice” and that such factors shouldn’t “too readily” be considered as economically relevant by fiduciaries. That differs from 2016 guidance from the Obama administration, which said such plans could consider ESG factors without violating their fiduciary duty, opening the way for more retirees to pursue socially-responsible investment strategies.

Under the latest guidelines, fiduciaries must “always put first the economic interests of the plan” and make financial factors the main consideration when evaluating investments. They also require managers to make sure any shareholder-engagement activities are likely to enhance economic value of their investments.

Photo courtesy of Dean Hochman.