Energy Infrastructure EO Raises ESG Eyebrows

Issuing an executive order designed to “promote private investment in the Nation’s energy infrastructure,” the Trump administration has called for a review involving retirement plan investments.

The executive order directs the Secretary of Labor to, “within 180 days of the date of this order, complete a review of available data filed with the Department of Labor by retirement plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) in order to identify whether there are discernible trends with respect to such plans’ investments in the energy sector.”

The order goes on to state that (again within 180 days of the date of the order), “the Secretary shall provide an update to the Assistant to the President for Economic Policy on any discernable trends in energy investments by such plans,” and shall also (again, within 180 days), “complete a review of existing Department of Labor åguidance on the fiduciary responsibilities for proxy voting to determine whether any such guidance should be rescinded, replaced, or modified to ensure consistency with current law and policies that promote long-term growth and maximize return on ERISA plan assets.

The EO comes almost a year to the day that the Labor Department issued Field Assistance Bulletin 2018-01, which sought to provide 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,” specifically about Interpretive Bulletin 2016-01 (relating to the exercise of shareholder rights and written statements of investment policy) and Interpretive Bulletin 2015-012 (relating to “economically targeted investments” (ETIs)). 

That FAB – widely viewed as pullback from the Obama administration’s more favorable view of ESG investments – cautioned that “fiduciaries must not too readily treat ESG factors as economically relevant to the particular investment choices at issue when making a decision,” and that “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.”

As for the current executive order, and how it might impact the growth and/or impact of ESG investing – well, that remains to be seen.

Once termed SRI (for socially responsible investments, or socially responsive investments), these days such factors are often referred to as ESG – environmental, social, ethical and governance.