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The U.S. Department of Labor (DOL) has issued final rules providing guidance on the exercise of shareholder rights, including proxy votes, connected to plan-held securities by fiduciaries of plans subject to the Employee Retirement Income Security Act of 1974 (ERISA). The biggest takeaway is these rules prohibit ERISA fiduciaries from considering environmental, social, and corporate governance, or similar considerations (ESG) in a way that would subordinate pecuniary factors when exercising proxy vote rights.
These regulations are preceded by other similar DOL rules, as we have discussed in prior advisories found here and here, emphasizing that fiduciaries who consider non-pecuniary factors in choosing investments at the expense of lower investment returns or higher investment risk or fees may be shirking their fiduciary duties under ERISA.