DOL

George Michael Gerstein Interviewed by Fund Intelligence on GAO’s ESG Report

Noah Zuss of Fund Intelligence interviewed me, along with Jon Hale (Head of ESG Research at Morningstar) and David Blanchett (Head of Retirement Research at Morningstar Investment Management), regarding the practical effects of the GAO report and its relation to the DOL’s own recent ESG guidance in this developing area. The article can be found here.

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.

Key Takeaways from the GAO Report on ESG Investing by ERISA Fiduciaries

The Government Accountability Office (GAO) yesterday released a new report on ERISA fiduciaries’ incorporation of environmental, social and governance (ESG) factors into its investment process. At 63 pages, here are the key takeaways:

  1. The report is focused only on instances where fiduciaries consider ESG factors as material risk factors that are part of an ordinary prudence analysis. In other words, the GAO did not focus on other strategies (e.g., impact investing), such as those that select an ESG factor for moral reasons, etc., which is the historical association of ESG investing. In this sense, the GAO deserves a lot of credit for focusing on this sophisticated approach to ESG.  You may recall that my paper on climate change risk focused on this very issue.
  2. Rather unfortunately, the report was largely completed prior to the DOL’s issuance of Field Assistance Bulletin (FAB) 2018-01, which we discussed here. The principal recommendation by the GAO is for the DOL to issue guidance on whether a fiduciary can incorporate ESG factors into the management of a default investment option in a defined contribution plan. As you may know, FAB 2018-01 seemed to do just that, though not in an entirely clear manner. Nevertheless, the GAO addressed FAB 2018-01 at the end of the report and narrowed its initial recommendation, namely, that the DOL better explain how fiduciaries can utilize the integration strategy in a QDIA. In the DOL’s defense, FAB 2018-01 seems to address (to some extent) whether a QDIA can utilize the integration strategy; the DOL instead hit the breaks on offering a themed ESG product as a QDIA.
  3. According to the GAO, the DOL is amenable to issuing additional guidance on ESG investing, provided there is enough interest by fiduciaries. The DOL is mum on its Form 5500 project, and whether any ESG disclosures on a revised 5500 are in the works.
  4. Those close to ESG will unlikely find anything surprising in the GAO report on the various reasons why ESG is not yet widely adopted by US retirement plans: questions over the reliability/comparability of disclosures, ratings and rankings–designed to help fiduciaries incorporate ESG factors–all continue to be cited as impediments. Regulatory uncertainty, and definitional ambiguities, also remain hindrances. I recently spoke on a number of these constraints to greater adoption by fiduciaries.

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.

George Michael Gerstein Discusses Interplay of SEC Release With DOL Fiduciary Rule and State Developments

George Michael Gerstein (right), joining Larry Stadulis (not pictured) and Dave Grim (left) at the ICI General Membership Meeting, identified the moving regulatory pieces and impetus of major fiduciary law reform.

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.

InvestmentNews: 5th Circuit denies states’ second attempt to defend DOL fiduciary rule

The 5th Circuit again denied efforts by California, New York and Oregon to defend the DOL Fiduciary Rule. The Administration has a few more weeks to decide whether to appeal to the Supreme Court.

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.

David Grim, Larry Stadulis & George Michael Gerstein @ ICI – The SEC, the DOL, and the States: A New Fiduciary World

Join us tomorrow at the ICI General Membership Meeting: 5:15-5:55 pm at Washington Hilton, Gunston Hall

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.

Slim Chances

Bill Mandia talks to Fund Action about the states’ arguments for a Fifth Circuit re-hearing on the Fiduciary rule.

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.

Bill Mandia talks to Citywire about Fifth Circuit developments on DOL rule

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.

Litigator Bill Mandia Provides Key Context on the States’ Latest Efforts re. the DOL Fiduciary Rule

Undeterred by the Fifth Circuit’s rejection of their request to intervene in U.S. Chamber Commerce v. U.S. Dep’t of Labor, the States of California, New York, and Oregon moved for reconsideration in the Fifth Circuit today. The States request that the three-judge panel who heard the appeal reconsider their denial of the States’ petition to intervene or, at a minimum, refer the question of intervention to the entire Fifth Circuit for a rehearing en banc.  The States previously requested a rehearing en banc, which the court rejected as improper because the States are technically not parties to the appeal.  The States’ motion notes that the business groups that filed the action against the DOL will oppose their request and that the Department of Justice, on behalf of the DOL, takes no position on it.

It remains to be seen how the panel addresses the request, but for the reasons discussed in our prior blog post, the States face an uphill battle.  It is unlikely that the panel will reconsider its prior ruling and allow the States to intervene because the States have not presented any new lines of evidence or argument that were unavailable to them when they made their original request to intervene.  While a 2-1 decision on a significant issue always raises the possibility of a rehearing en banc, the relative weakness of the States’ arguments regarding intervention may lead the panel to conclude, even in a 2-1 vote, that the issue is not worth the entire Fifth Circuit’s time.

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.

The Beat Goes On – States Seek Reconsideration from Fifth Circuit

The states of California, New York, and Oregon have requested reconsideration of the Fifth Circuit’s denial of their request to intervene in the fiduciary rule case.

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.

FX Service Providers Should Watch DOL Fiduciary Rule Developments

As I wrote in Profit & Loss last year, FX service providers, particularly those in an agency capacity, should continue to monitor the fate of the DOL Fiduciary Rule, particularly for straddling the line between pure sales/marketing and those communications that may give rise to a “recommendation” under the 2016 rule. Hedging managers will stand to benefit if we revert to the 1975 rule.

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.