George Michael Gerstein

George Michael Gerstein advises financial institutions on the fiduciary and prohibited transaction provisions of ERISA. As co-chair of the fiduciary governance group, he assists clients with tracking, and understanding, the numerous fiduciary developments at the federal and state levels, including the rules and regulations of governmental plans. He also advises clients with respect to the fiduciary duty implications of ESG investing.

Scalia’s nomination to be next DOL secretary advances

Investment managers are using ESG factors more frequently

A recent Russell Investments and BNY Mellon Investment Management study indicates greater utilization of ESG factors in the decision-making processes of active managers, as reported by Pensions & Investments. Here are some of the highlights, as described in the article:

  • 55% of respondents (total=300) say they now use material ESG investment factors to be part of the decision-making. 36% of those cited the possibility of superior risk-adjusted returns as a basis;
  • Governance was the most important factor for 86% of respondents.
  • An increase of 48% of respondents say they always address ESG issues in their meetings with company management.
  • 82% utilize a formal investment policy to guide ESG decisions.

What’s in a title?

Why is there investor confusion over ESG products?

A recent Ignites article discusses an Allianz survey on ESG interest among retail investors. As we have seen for a while, interest in ESG across demographics has increased, leading manufacturers to offer more ESG products. This has occurred in the place space, too. Yet, 73% of respondents report difficult in assessing the funds for one or more E, S and/or G factors. One well-known reason for this gap between interest and understanding is the still nascent methods portfolio companies have to report ESG risks, thereby inhibiting a uniform approach by the funds and managers to synthesize that data, invest accordingly and report to investors the data is incorporated. Simply, there is not perfect information yet. Frustration by asset owners will persist until there is a consensus on reporting.

The flavors of fiduciary status under ERISA

Scalia nomination update

Senator Lamar Alexander (R – TN), chair of the Health, Education, Labor and Pensions Committee, announced that there will be a final panel vote on September 24 re. Eugene Scalia’s nomination to be the next DOL Secretary.

TDFs as targets in ERISA litigation

Climate change risk disclosure and Regulation S-K

In their Joint Statement on the proposed changes to Regulation S-K, Commissioners Jackson and Lee note the following in respect of disclosure of climate change risk:

“Additionally, the proposal does not seek comment on whether to include the topic of climate risk in the Description of Business under Item 101.  Estimates of the scale of that risk vary, but what is clear is that investors of all kinds view the risk as an important factor in their decision-making process. Yet it remains tough for investors to obtain useful climate-related disclosure. One argument against mandating such disclosure is that climate risk is too difficult to quantify with acceptable accuracy. Whatever one thinks about disclosure of climate risk, research shows that we are long past the point of being unable to meaningfully measure a company’s sustainability profile.”

The Commissioners encourage commenters to provide data and analysis on whether climate change risk transparency should be addressed in a final rule.

Munis and ESG?

Ninth Circuit rules arbitration permissible in 401(k) litigation