Impact investors celebrate DOL ruling

Leading US impact investing groups celebrated over Thanksgiving after the Department of Labor (DOL) completed its overhaul of rules to allow for environmental, social and governance (ESG) investing.

The DOL announced a final rule last week that allows pension funds “to consider climate change and other ESG factors when they select retirement investments” and vote their shares.

The US Impact Investing Alliance said the rule was “a clear win for American workers” as it “ensures their retirement savings will be invested in line with prudent risk management practices”.

“Given the recent wave of misinformed political attacks seeking to undermine the validity of ESG strategies, this rulemaking provides much needed clarity for investors and fiduciaries that ESG factors are indeed material,” the alliance said in a statement.

“The common-sense approach offered by DOL leaves investment decisions in the hands of workers and investment professionals, not at the mercy of politically motivated interests. We strongly support the final rule and applaud the DOL for its leadership on this issue.”

Lisa Woll, CEO of US SIF, a leading forum for sustainable investment, said: “The final rule recognizes that the consideration of ESG criteria can help protect the long-term interests of retirement beneficiaries and should be treated like any other investment criteria used by plan fiduciaries under the duty of loyalty and care.”

Woll added that the rule was “catching up to where the marketplace has been for years” in allowing investors to account for staff welfare, tax, lobbying, supply chain, and climate-related issues.

The DOL has been working on the rules since President Joe Biden took office in 2021, rolling back measures put in place by the previous administration to restrict the ability of investors to account for non-financial risks in their investment decisions.