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Wednesday, Aug. 12, 2020

Is the Labor Department moving to limit 401(k) investments in ‘socially responsible’ assets?

Samuel Henning, Gigafact
yes

The Labor Department, which regulates retirement plans, is seeking to amend a rule governing 401(k) and similar plans, making it harder for their managers to invest in so-called ESG funds, which weigh environmental, social and governance considerations in investment decisions. The change would require fund managers to make decisions based on purely economic factors before considering any “non-pecuniary” aspects of a fund. "Retirement plans are not vehicles for furthering social goals," the Labor Secretary said.

Interest in ESG funds has grown along with public concern about climate change. Blackrock, the world's largest investment manager, says ESG funds can outperform other investments during market downturns. Younger investors in particular have responded to the opportunity to save for retirement in what they see as a more socially responsible way.

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