The new Biden government, what will change?
2022.11.22 14:59
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The new Biden government, what will change?
Budrigannews.com – On Tuesday, President Joe Biden’s administration reversed restrictions on retirement plans that required investors to take into account environmental, social, and governance (ESG) factors like climate change and racial justice when choosing investments.
After Democrat Vice President Joe Biden directed government agencies to assess climate-related risk to retirement and pension investments, the Labor Department issued a final rule that was first proposed last year.
Although the rule stipulates that investment decisions must be based on traditional financial factors, it will make it simpler for retirement plans to invest in socially responsible funds and businesses. The department said that the rule applies to plans with an aggregate investment of $12 trillion. It takes effect 60 days after it is officially published, which could be this week.
Under Biden’s administration, regulations that allowed retirement plans to only consider financial factors and not social responsibility when making investment decisions and exercising shareholder rights were repealed in 2020 under Trump, a Republican.
According to the Labor Department, the Trump administration’s regulations, which had been criticized by business groups and the financial sector, did not take into account the positive effect that ESG factors can have on investment returns over the long term.
When voting by proxy on behalf of shareholders, the new rule also permits plan fiduciaries to take ESG factors into consideration.
In a statement, Lisa Gomez, who heads the Labor Department office that issued the rule, stated that the new policy would end “the chilling effect created by the prior administration” and remove unnecessary barriers to investing based on ESG principles.
According to Andy Banducci, senior vice president at the ERISA Industry Committee, which represents employee benefit plans, the rule also makes it clear that plans are not required to consider any specific factors when selecting investments. This clears up the confusion that was created by the proposal from last year.
On Thursday, some Republican lawmakers defended the Trump administration’s policy, claiming that it was necessary to prevent retirement plans from prioritizing social and political goals over financial returns.
In a statement, Republicans on the House of Representatives’ labor committee said, “The Biden administration’s new rule jeopardizes the financial security of many retirement savers, especially workers and retirees who may be put into ESG investments by default.”
Carbon emissions and workplace diversity are two examples of ESG issues that have come under increasing pressure from shareholders to be addressed by businesses.
Even though this year’s market decline has resulted in an unprecedented drop in investments, ESG-compliant funds oversee an estimated $6.5 trillion in assets.
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