Robert H. Sitkoff

ESG Investing After the New Labor Department Rule on “Financial Factors”

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In the wake of the U.S. Department of Labor’s new rule on “Financial Factors in Selecting Plan Investments,” adopted last November and effective as of January 12, 2021, some ERISA fiduciaries and their advisers have expressed concern about the permissibility of ESG investing. This summary of the rule aims to dispel that concern. In brief, the final rule confirms the permissibility of ESG investing by an ERISA fiduciary to improve risk-adjusted returns. Fiduciaries that use ESG factors to improve risk-adjusted returns have nothing to fear from the rule, and indeed should be reassured by it.

Much of the concern … Read more

Faithful Fiduciaries Have Nothing to Fear from DOL Investment Rule

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Late in the afternoon of the Friday before Election Day, the Department of Labor finalized a rule that requires pension and retirement plan fiduciaries to consider only financial interests when investing plan funds. On its face, the rule seems anodyne. Yet it has provoked a strong negative reaction from fund managers and others who advocate for use of Environmental, Social, and Governance (“ESG”) factors in investing.

This negative reaction is puzzling. Advocates for ESG investing, such as the United Nations and BlackRock’s Larry Fink, argue vociferously that ESG investing makes money while also doing good. The rule requires pension … Read more

A Tip for Financial Advisers to Retirement Savers: Heed the Prudent Investment Rule

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Today the bulk of American workers’ retirement savings, worth trillions of dollars, is in self-directed individual retirement accounts (IRAs) and defined contribution pension plans. Understandably, many workers with self-directed accounts turn to financial advisers for help in matching the vast and complicated array of investment options in today’s financial markets to the worker’s particular circumstances. However, the manner by which financial advisers are compensated has long raised concerns about conflicts of interest. Some advisers are compensated by the providers of the financial products that the adviser sells, giving the adviser a financial incentive to recommend the products that provide the … Read more