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"It continues to be striking that they did this in the face of overwhelming opposition from investors," said Jonas Kron, chief advocacy officer at sustainable investment firm Trillium Asset Management.
Kron was referring to a controversial rule that the U.S. Department of Labor finalized last week that says fiduciaries working on retirement plans that fall within the scope of the Employee Retirement Income Security Act of 1974, or ERISA, must now consider investments based purely on financial risks and returns.
The Labor Department acknowledged that certain environmental, social and governance issues such as climate change and poor corporate governance can create "an economic business risk or opportunity" to companies and their investors. But like many ESG skeptics, the Labor Department raised concerns about whether an ERISA plan fiduciary could be swayed by the rising momentum behind ESG to pick investments that carry higher fees with worse returns, ultimately hurting beneficiaries. While the agency did not flatly ban fiduciaries from selecting ESG funds, advisers will face a higher hurdle based on an ESG product's financial performance and risks to justify picking it over a traditional fund.
Some legal experts say the outcome of the U.S. elections will determine whether the Labor Department rule ultimately goes into effect. In this week’s newsletter, we also examine how election results could impact the U.S. energy transition, environmental justice policies and the central bank’s approach to longstanding racial disparities in the U.S. economy. Our Chart of the Week shows how workers of color face persistently higher unemployment rates.
Chart of the Week
Sustainable investment groups weigh next steps on Labor Department's ESG rule
"Protecting retirement savings is a core mission of the U.S. Department of Labor and a chief public policy goal for our nation," U.S. Labor Secretary Eugene Scalia said after the agency finalized a rule that bars fiduciaries working on certain retirement plans from picking investments based on anything but financial factors. "This rule will ensure that retirement plan fiduciaries are focused on the financial interests of plan participants and beneficiaries rather than on other, non-pecuniary goals or policy objectives." The rule sparked immediate backlash from the sustainable investing community.
|President Donald Trump and Democratic presidential nominee Joe Biden
Source: Joe Biden for President Campaign
Biden win could accelerate US oil companies' participation in energy transition
The outcome of the Nov. 3 elections could cause major U.S. oil and gas companies to reevaluate their role in the energy transition and increase their carbon-reduction efforts, according to some industry observers. Climate change poses an "existential risk to the industry," and some major oil companies are beginning to reposition themselves to ensure they remain sustainable and profitable once oil is no longer their main product, according to John Thieroff, senior analyst with Moody's Investors Service.
Fed's focus on racial inequalities could sharpen under Dem sweep
The Federal Reserve is grappling with how it could play a larger role in tackling long-standing racial disparities in the U.S. economy, even as the COVID-19 pandemic reverses recent progress. Democratic candidate Joe Biden's platform calls on the Fed to "aggressively enhance" its monitoring of racial disparities in the economy and diversify the Fed's mostly white leadership. Democrats have also introduced legislation that would explicitly add the elimination of racial disparities to the Fed's mandates.
Target Zero: Duke Energy gas plants key hurdle to long-term emissions goals
Coal sees diminished role in US presidential race with odds slim for new plants
Manufacturers turn to low-carbon aluminum as they seek emissions cuts
Biden victory could usher in new era of environmental justice policies
AmEx unveils $1B plan to promote racial, ethnic, gender equity
Credit Suisse aims to double number of senior Black employees
Pipeline firms' renewable energy comments failing to attract new ESG investors
Companies improve climate disclosure but more to be done – G-20 task force
UK's BSI sets standard for responsible, sustainable investment management
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Questions or suggestions? Contact S&P Global Market Intelligence’s ESG News team at ESGNews@spglobal.com.