In late 2022, the U.S. Department of Labor (DOL) issued the final regulations addressing the responsibilities of ERISA fiduciaries when considering environmental, social, and governance (ESG) factors in investment decisions. These regulations also govern the exercising of shareholder rights, such as voting proxies, that might impact ERISA-covered clients. The new DOL rule on proxy voting is set to take effect on December 1, 2023.
The final regulations released by the DOL aim to clarify the extent to which ERISA fiduciaries can take into account ESG factors while making investment decisions on behalf of ERISA-covered clients. It also specifies how fiduciaries can exercise shareholder rights, such as voting proxies, in the interest of these clients. The implications of these final rules could be broad, affecting both the investment strategies of ERISA fiduciaries and their engagement with the companies in their portfolio.
As a response to these forthcoming changes, ERISA fiduciary investment managers may want to undertake necessary action items to stay compliant with the new rules. While the specific course of action may depend on the particular circumstances of each manager, some general suggestions might include a review of current investment policies, a potential revision of those policies to comply with the new regulations, and an evaluation of how ESG factors are currently considered in investment decision-making processes.
It is particularly important for fiduciary investment managers to be aware of this rule change and prepare in advance to ensure compliance. Those who fail to adapt could potentially face regulatory scrutiny or even legal action.
For a more detailed discussion on the final rules and potential actions for investment managers, click here. This article was provided by Proskauer Rose LLP.