Federal Court Sides With DOL on ESG Investing Rule

A federal court has rejected yet another challenge to the Department of Labor's rule regarding consideration of environmental, social and governance factors by retirement plan sponsors making plan investment decisions. The rule allows ERISA plan fiduciaries to consider ESG factors as a part of their evaluation of whether a particular investment may be profitable. Under the rule, the primary consideration must be the potential for return on investments and plan fiduciaries are not permitted to take on greater risks to further social goals. However, the rule acknowledges that ESG factors may be relevant in determining the investment's potential profitability. The court found that the rule was not arbitrary or capricious and that the DOL's rule making did not violate the Administrative Procedures Act. For more information on the ongoing debate over whether considering ESG factors is appropriate, visit Tax Facts Online. : Q .