Text of DOL Field Assistance Bulletin No. 2018-01: Proxy Voting, Shareholder Engagement, and Economically Targeted Investments "This Field Assistance Bulletin provides guidance to the Employee Benefits Security Administration's national and regional offices to assist in addressing questions they may receive from plan fiduciaries and other interested stakeholders about Interpretive Bulletin 2016-011 (relating to the exercise of shareholder rights and written statements of investment policy), and Interpretive Bulletin 2015-012 (relating to 'economically targeted investments' (ETIs))....

"Fiduciaries must not too readily treat ESG factors as economically relevant to the particular investment choices at issue when making a decision. It does not ineluctably follow from the fact that an investment promotes ESG factors, or that it arguably promotes positive general market trends or industry growth, that the investment is a prudent choice for retirement or other investors. Rather, ERISA fiduciaries must always put first the economic interests of the plan in providing retirement benefits. A fiduciary's evaluation of the economics of an investment should be focused on financial factors that have a material effect on the return and risk of an investment based on appropriate investment horizons consistent with the plan's articulated funding and investment objectives....

"In the case of an investment platform that allows participants and beneficiaries an opportunity to choose from a broad range of investment alternatives ... a prudently selected, well managed, and properly diversified ESG-themed investment alternative could be added to the available investment options on a 401(k) plan platform without requiring the plan to remove or forgo adding other non-ESG-themed investment options to the platform. In the case of a qualified default investment alternative (QDIA), however, selection of an investment fund is not analogous to merely offering participants an additional investment alternative as part of a prudently constructed lineup of investment alternatives from which participants may choose. Nothing in the QDIA regulation suggests that fiduciaries should choose QDIAs based on collateral public policy goals. In the QDIA context, the decision to favor the fiduciary's own policy preferences in selecting an ESG-themed investment option for a 401(k)-type plan without regard to possibly different or competing views of plan participants and beneficiaries would raise questions about the fiduciary's compliance with ERISA's duty of loyalty....

"If a plan fiduciary is considering a routine or substantial expenditure of plan assets to actively engage with management on environmental or social factors, either directly or through the plan's investment manager, that may well constitute the type of 'special circumstances' that the IB 2016-01 preamble described as warranting a documented analysis of the cost of the shareholder activity compared to the expected economic benefit (gain) over an appropriate investment horizon." Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

EBSA Releases Field Assistance Bulletin Clarifying Issues Regarding Proxy Voting, Shareholder Engagement, and Economically Targeted Investments
"[ FAB 2018-01 ] clarifies earlier interpretations set forth in Interpretive Bulletins (IB) 2015-01 and 2016-01. In IB 2015-01, the Department held that fiduciaries may not sacrifice returns or assume greater risks to promote collateral environmental, social, or corporate governance (ESG) policy goals when making investment decisions.... ERISA fiduciaries must always put first the economic interests of the plan in providing retirement benefits. The FAB announced today advises that fiduciaries of ERISA-covered plans must avoid too readily treating ESG issues as being economically relevant to any particular investment choice. It further advises that ERISA does not necessarily require plans to adopt investment policy statements with express guidelines on ESG factors."
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]