23 States Join Letter Commenting on the Proposed Department of Labor Rule
Salt Lake City, UTAH – Utah Attorney General Sean Reyes, State Treasurer Marlo Oaks and State Auditor John Dougall were joined by state attorneys general and financial officers representing 23 states in a letter commenting on a proposed Department of Labor rule that would fundamentally alter fiduciary standards in the United States designed to protect employee interests in their retirement investments above all other considerations.
The proposed rule change entitled, Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights (EBSA-2021-0013-0001), would provide plan sponsors and investment managers a safe harbor to environmental, social and governance (ESG) investment strategies in retirement plans as a default option. ESG funds focus on social causes and political goals when investing assets thereby eroding the traditional fiduciary obligation owed to beneficiaries. The proposed rule would also permit fiduciaries to vote proxies in ways that support ESG goals contrary to shareholder interests.
The letter states: “It is our position that social and political issues should not be considered by fiduciaries in employee retirement savings investment decisions. We are not opposed to any person or entity considering ESG or other social factors when investing their own money; individuals and companies may promote social causes through their investments to the extent they desire. But we are opposed to investment managers and employers being encouraged or mandated to consider ESG factors and protected from legal action when they do.”
“Ensuring the retirement security of American workers should remain the single focus of investment managers. Enacting good public policy should remain a political function. By mixing these two we lose the fiduciary standard that is a cornerstone of retirement law and protects plan participants against unscrupulous or misaligned interests,” Utah Attorney General Sean D. Reyes said. “Blurring the separation of politics and fiduciary obligations is exactly what the proposed rule would do. It is irresponsible and unhelpful to average American workers who are already underfunding their retirement.”
“Investment managers should focus on their expertise – creating returns for American workers saving for retirement. Political agendas should not be enforced through investment managers. The proposed rule would politicize retirement savings plans rather than preserve the fiduciary loyalty owed to plan participants who are counting on financial returns to fund their retirement,” Utah Treasurer Marlo M. Oaks said. “Politics needs to be handled by elected officials. Investment managers and activist shareholders are not accountable to voters. Using hard earned retirement money to further political agendas is costly to participants and undermines our political process. This should not be a partisan political issue.”
Utah Auditor John Dougall said, “Activists are pressuring businesses to impose Environmental, Social, and Corporate Governance (ESG) considerations. These social agendas too often financially disenfranchise business owners and weaken management’s duty to act in the best interest of all shareholders.”
The letter can be found on the State Treasurer’s website at: https://treasurer.utah.gov/wp-content/uploads/Prudence-and-Loyalty-DOL-Rule-Comment-Letter-Amended.pdf.