ESG-Related Investments and ERISA: Key Issues for ERISA Counsel, Plan Sponsors, Administrators

This CLE course will provide employee benefits counsel, plan sponsors, and asset managers guidance on ERISA fiduciary standards for ESG-related investments. The panel will discuss the current regulatory framework and recent developments, fiduciary issues, permissibility of ESG factors in investments, and transaction risks associated with ERISA plan investments. The panel will also discuss ERISA compliance and rules for plan investments, exposure to fiduciaries, transaction and security risks, and best practices for ERISA counsel, fund managers, and advisers.

The rules relating to ESG investments for retirement plans may undergo a shift away from considering ESG factors for investments under the current administration. Employee benefits counsel, plan sponsors, and asset managers must review their plan investments, QDIA options, and investment policy statements to determine whether changes to the plans' investment options or strategies are appropriate.

Generally, the potential investment impact of ESG considerations has provided a framework for alleging violations of ERISA duties of loyalty and prudence imposed on plan sponsors and investment fiduciaries in selecting investments on behalf of a retirement plan. This is mainly due to the impact of such investments on financial returns and risks to plan participants with prior DOL regulations prohibiting the inclusion of an investment fund or portfolio in a plan's QDIA, with a focus on factors relating to ESG investments.

Recently, in Spence v. American Airlines, the plaintiff claimed breaches of fiduciary duties under ERISA, alleging that the defendant allowed the investment manager to promote an ESG agenda, resulting in investments being made subject to ESG factors. The court ruled that American Airlines breached its fiduciary duty, but denied the plaintiff's request for monetary damages and imposed restrictions on American Airlines' plan management.

Listen as our panel discusses critical factors for plan fiduciaries in selecting plan investments, current developments for ESG-related investments and recent cases, and best practices for plan sponsors and asset managers in pursuing ESG investments.