ACORE Challenges Labor Department Proposal Limiting ESG Investment, Requests Longer Comment Period

29 Jul 2020

In comments submitted to the U.S. Department of Labor, the American Council on Renewable Energy (ACORE) challenged the Department's recently proposed rule relating to investment duties under Title 1 of the Employee Retirement Income Security Act (ERISA) and ESG investing.  

"Absent considerable modification, the Department of Labor's proposed rule needs to be withdrawn," said ACORE President and CEO Gregory Wetstone. "ESG investments consistently outperform the market and are often recognized as the best choice for realizing maximum long-term returns. This proposal would have federal officials overriding the free market and putting their collective thumb on the scale by presuming to tell investment professionals where they should direct their investments."

According to data from BloombergNEF, companies that perform well in ESG metrics saw stronger returns than other funds this past spring. And in 2019, returns on ESG stocks outperformed the S&P by 45 percent.

In the filing, ACORE makes the following arguments:

  1. The proposed rule is redundant to the requirements of existing law and therefore unnecessary to protect the interests of investors.
  2. Rather than providing additional clarity around fiduciary compliance, the proposed rule is instead likely to sow increased confusion and impose excessive regulatory burdens on ERISA fiduciaries.
  3. The proposed rule offers no evidence of harm to ERISA plan participants or beneficiaries due to ESG investing.
  4. ESG investing is a generally accepted investment theory with a proven track record of financial success.
  5. ESG investment principles are detailed, substantive and pecuniary in nature.
  6. The proposed rule would harm America's global competitiveness by allowing foreign investors to earn comparatively higher returns.
  7. The Department should modify the proposed rule to clarify that ERISA's fiduciary duties compel qualified investment professionals to consider ESG investment principles as economic considerations under generally accepted investment theories.
  8. The Department should extend the unusually short 30-day comment period to 120 days to allow the full range of affected parties to express their concerns.

To download a copy of ACORE's submitted comments, click here.

ACORE | http://www.acore.org