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December 15, 2021 at 05:03 PM
What You Need to Know
- The American Securities Association, ASA, which represents regional financial services firms, opposes the proposal.
- The proposal amends a restrictive rule adopted by the Trump administration, which has not been enforced by the Biden administration.
- The DOL will review the public comments before issuing a final rule.
Financial trade organizations for the financial markets have submitted very different responses to the Department of Labor’s proposed rule that allows 401(k) plan fiduciaries to choose investments based on environmental, social and governance (ESG) factors.
SIFMA, which represents 80% or $18 trillion of broker-dealer client assets, 50% or $34 trillion of investment advisor AUM and 70% or 263,000 U.S. financial advisors, and the Investment Company Institute, which represents asset managers overseeing $32.7 trillion in the U.S. for more than 100 million U.S. shareholders, generally supports the proposal but wants modifications.
The American Securities Association, ASA, which represents regional financial services firms, opposes the proposal on the grounds that it would “weaken protections for retirement investors.”
A group of four Republican senators who are ranking members of Senate committees on Aging, Finance, Banking and Health, Education and Labor — Tim Scott, R-S.C.; Mike Crapo, R.-Idaho; Pat Toomey, R-Pa.; and Richard Burr, R-N.C. — also want the proposal scrapped.
The ASA and the four senators accuse the DOL of playing politics with investors’ retirement funds. That’s also the case with most comments from individuals made public on the DOL site, who accuse the federal government, in a sentence or two, of interference in their retirement accounts.
In comparison, Better Markets, a nonprofit independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, supports the DOL proposal in its comment letter.
The proposal amends a restrictive rule adopted by the Trump administration, which has not been enforced by the Biden administration following an executive order.
SIFMA’s and ICI’s Comments
Both SIFMA and ICI welcomed the latest DOL proposal for clarifying that retirement plan fiduciaries may consider ESG factors in evaluating plan investments without putting themselves at regulatory risk.
“The proposal makes clear that ESG factors should be treated the same as any other economic factors. We appreciate the Department’s work to provide this much-needed certainty to the retirement plan community,” said ICI General Counsel Susan Olson in a statement.
