DOL signaling an updated climate in the world of employee benefits

Over the last several months, the U.S. Department of Labor (DOL) has signaled a friendlier stance toward considering environmental, social, and governance (ESG) factors as they relate to employee benefits. Just how far the department will go is yet to be seen, but it’s clear a shift in thinking has the potential to change how employee benefit plan fiduciaries make decisions. Recent developments address barriers to consideration of ESG factors as well as steps toward protecting workers’ retirement accounts from climate-related risks.

Background

ESG refers to organizations’ stands on environmental issues as well as concerns about social justice and corporate leadership. In recent years, investors have begun to include ESG factors in their decisions about where to put their money.

A couple months after President Joe Biden took office, the DOL announced that pending further study, it would not enforce actions taken in the waning days of the Trump administration that were seen as having a chilling effect on benefit plan fiduciaries’ ability to consider ESG factors.

Then in October 2021, the DOL proposed a rule that could allow benefit plan fiduciaries more leeway under the Employee Retirement Income Security Act of 1974 (ERISA). The department followed up that development in February 2022 with a call for public comment on what actions, if any, it should take under ERISA to protect retirement savings and pensions from risks posed by climate change.

Climate effects