On April 23, 2018, the DOL issued a Field Assistance Bulletin ("FAB") to provide the national and regional offices of the Employee Benefits Security Administration assistance with addressing questions received from plan fiduciaries and other relevant stakeholders. The FAB addresses the DOL's prior guidance regarding the exercise of shareholder rights, written investment policy statements and economically targeted investments ("ETIs").

In FAB 2018-01, the DOL analyzed its previous guidance set forth in Interpretive Bulletins ("IB") 2016-01 and 2015-01. These IBs were issued, respectively, to (i) help plan fiduciaries understand their obligations and responsibilities in connection with the voting of proxies and the exercise of shareholder rights, and the maintenance of and compliance with investment policy statements, and (ii) set forth the DOL's interpretation of certain ERISA provisions in connection with plan investments in ETIs. In FAB 2018-01, the DOL noted, among other things, the following:

  • Environmental, social or governance ("ESG") factors can sometimes be more than "tie-breakers" in selecting between competing investments where such factors involve "material business risks or opportunities to companies that company officers and directors need to manage as part of the company's business plan and that qualified investment professionals would treat as economic considerations under generally accepted investment theories." The weight given to the ESG factors must be appropriate in relation to the risk and return involved as compared to other pertinent economic factors.
  • Plan fiduciaries must not "too readily" treat ESG factors as economically relevant to investment choices when making a decision. Instead, plan fiduciaries must always prioritize the economic interests of the plan in providing benefits. In evaluating the economics of an investment, plan fiduciaries should focus 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."
  • Although a plan's investment policy statement ("IPS") is permitted to contain policies concerning the consideration of ESG factors or the integration of ESG-related tools in evaluating an investment, an IPS is not required under ERISA to contain guidelines regarding ESG factors or the use of ESG-related tools. The DOL also noted that just because an IPS includes ESG-related guidelines, a plan fiduciary is not required to always adhere to the IPS (and, consistent with ERISA, must disregard the IPS if compliance therewith is imprudent).
  • The DOL's prior guidance in IB 2016-01 was not intended to imply that plan fiduciaries, including third-party investment managers, should "routinely incur significant plan expenses" on activities such as "fund[ing] advocacy, press, or mailing campaigns on shareholder resolutions, call[ing] special shareholder meetings, or [initiating] or actively sponsor[ing] proxy fights on environmental or social issues relating to [publicly held] companies."

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