Today – July 30th – is the deadline for submitting comments on the Department of Labor’s proposed rule restricting the use of ESG in ERISA plans.
If you were thinking about submitting and just haven’t gotten to it, it’s not too late – really. The proposed rule is here at the Regulations.gov web site. The direct link to submit a comment is on that page and also here.
If you have a jaundiced view of the Administration’s motivation behind this rule, you are not alone. Kate Mackenzie’s July 8th Bloomberg Green column “Trump’s Plan to Block Pensions From ESG Won’t Help Fossil Fuels” captures that view nicely.
You may therefore conclude that it’s not worth the effort to comment. That’s not the answer. We should respect the process, and large numbers of negative comments have influenced proposed rules. But whatever the outcome here, it’s important to speak up and put your views on record. Should there be a change in Administration in January, a strong response now will help prioritize undoing this rule among a plethora of changes that will be on deck. As of this morning, 1,137 comments have been submitted. (It will take time to be able to see and assess the nature of the comments.)
If you have the ability to offer a comment, especially at this late date, a detailed rebuttal of the rule is not required. You can use the same guidelines that are appropriate for reaching out to legislators – tell your story. If ESG is material, relevant and important to your work as an investment professional, simply say that.
If a sample letter would be helpful, the folks at Ceres have prepared one that they have shared with their members, partners and the wider community. They encourage people to use it or take ideas from it.
I know not many will be able to add a last minute comment. I wrestled with an ever-lengthening list of topics I wanted to raise in comments. I settled on three main points.
- The proposed rule was wrong on the facts. ESG factors are material financial considerations. Their use should not be restricted.
- It is out of step with the investment industry and its clients
- It is regulatory overreach. In an attempt to selectively address one specific set of factors – environmental, social and governance – it nearly doubles the size of the rule, overriding the consistent, comparable and powerful guidance that this rule provides.
It was more important to participate than to attempt to cover everything. There is much more to say on this topic, and I plan to write further articles on it.
The full text of my submitted comments can be seen in this PDF. I welcome thoughts, feedback and a dialogue.
The proposed rule, taken at face value, raises issues that many of us working in Sustainable Investing are also concerned about. Thoughtfully listening to and addressing those challenges is part of the evolution of sustainable investing.
At the same time, the proposed rule encompasses so many misconceptions, factual errors and errors of judgement that it calls out for a thoughtful and ongoing response.
I hope other will join me in both these efforts.