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Ret plan investments - social


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Climate Change Defines the Fiduciary (PDF)
"It is now high time for fiduciaries to begin or continue a process to identify and manage both the investment risks and opportunities arising from climate change in accordance with their fiduciary obligations under [ERISA], especially [DOL] Interpretive Bulletin (IB) 2015-01. This process would encompass engaging plan service providers, particularly investment managers, on what steps they are taking to address both the risks and opportunities, recognizing that critical disclosures continue to evolve. This process would also include shareholder engagement with issuers on improved disclosure and transparency regarding climate risks in accordance with IB 2016-01." (Stradley Ronon via Bloomberg BNA Tax Management Planning Journal)
[Official Guidance] Text of IRS Disaster Relief Notice PR-2017-01, for Victims of Hurricane Irma in Puerto Rico
"Victims of Hurricane Irma that took place beginning on Sept. 5, 2017 in parts of Puerto Rico may qualify for tax relief from the [IRS].... Individuals who reside or have a business in the municipalities of Adjuntas, Aguas Buenas, Barranquitas, Bayamón, Camuy, Canóvanas, Carolina, Cataño, Ciales, Comerío, Culebra, Guaynabo, Hatillo, Jayuya, Juncos, Las Piedras, Loiza, Luquillo, Orocovis, Patillas, Quebradillas, Salinas, San Juan, Utuado, Vega Baja, Vieques, and Yauco may qualify for tax relief.... [C]ertain deadlines falling on or after Sept. 5, 2017 and before Jan. 31, 2018, are granted additional time to file through Jan. 31, 2018." (Internal Revenue Service [IRS])
[Official Guidance] Text of IRS Disaster Relief Notice GA-2017-02, for Victims of Hurricane Irma in Georgia
"Victims of Hurricane Irma that took place beginning on Sept. 7, 2017 in Georgia may qualify for tax relief from the [IRS].... Individuals who reside or have a business in any of the 159 counties in Georgia may qualify for tax relief.... [C]ertain deadlines falling on or after Sept. 7, 2017 and before Jan. 31, 2018, are granted additional time to file through Jan. 31, 2018." (Internal Revenue Service [IRS])
[Opinion] Pensions Leaving Workers Behind by Focusing on Messaging, Politics
"[The Council for Institutional Investors (CII)] describes itself as a 'leading voice for effective corporate governance practices for U.S. companies and strong shareowner rights and protections.' But what started off as promoting good governance has transformed into politically motivated environment and social governance, often referred to as ESG. Fiduciary responsibility has taken a back seat.... CII members are staring at an unfunded liability of nearly $4 trillion ... So why do they insist on devoting so much of their time and resources on initiatives that will do nothing to help close that gap?" (Mark A. Bloomfield, American Council for Capital Formation, via Investor's Business Daily)
[Official Guidance] Text of IRS Disaster Relief Notice VI-2017-01, for Victims of Hurricane Irma in U.S. Virgin Islands
"Victims of Hurricane Irma that took place beginning on Sept. 6, 2017 in parts of U.S. Virgin Islands may qualify for tax relief from the [IRS].... Individuals who reside or have a business in the Islands of St. John and St. Thomas may qualify for tax relief.... [C]ertain deadlines falling on or after Sept. 6, 2017 and before Jan. 31, 2018, are granted additional time to file through Jan. 31, 2018." (Internal Revenue Service [IRS])
Adding Sustainable and Responsible Investing Options: A Resource Guide for Defined Contribution Plan Sponsors (PDF)
12 pages. "This step-by-step guide assists plan sponsors considering the addition of a sustainable, responsible and impact investing (SRI) option to a defined contribution retirement plan.... [1] Increase your knowledge of SRI and related performance and fiduciary questions ... [2] Gauge participants' interest in adding an SRI option ... [3] Discuss implementation with your consultant and/or plan administrator ... [4] Choose a fund or funds (and monitor performance) ... [5] Educate participants." (US SIF Foundation)
Thoughts on Data and ESG Investing
"Due to imperfect reporting and inconsistent metrics across industries and companies, investment managers have to 'trust, but verify' the actions of their portfolio companies post-engagement. Some typical ways managers can assess the impact of their engagement is by reviewing internally generated proprietary ESG ratings, target setting (e.g., emission, waste, water usage, etc.), and engagement reporting." (Callan Associates)
Making ESG a Part of Your DC Plans: Sustainability Could Help Plan Participants Reach Their Goals (PDF)
"[Environmental, social, and corporate governance (ESG)] options in a DC plan could make plan participants more successful investors by getting them to contribute earlier or contribute more to their retirement plan.... Just as they do as consumers, plan participants may also want to express their values through their investments and receive the emotional benefits they get from feeling like they are doing something good and impactful with their money.... Rather than discourage normal behavior, therefore, DC plans should encourage it by adding ESG options to their lineups." (Morningstar)
Considerations for ESG Policy Development (PDF)
"At the highest level, investors with policies considered to be effective and broadly supported share some common traits. They have articulated their purpose, priorities, and principles, and integrated these pillars within their investment policies and decision criteria. One key to arriving at this point is the investment of time. Effective ESG policy creation requires a process of stakeholder engagement that includes education about and exploration of the sustainable investing thesis and opportunity set." [Also available: Sample Language for Integrating the Goals of the Paris Climate Agreement into an Investment Policy Statement.] (Cambridge Associates)
Research Finds Investors Seeking Consistent ESG Disclosure
"68 percent of institutional investor respondents say non-financial performance frequently or occasionally played a pivotal role in their decision-making last year, compared to 52 percent the year before. Ninety-two percent of respondents agree or strongly agree that ESG issues have real quantifiable impacts on a company's performance." (Corporate Secretary)
Majority of Asset Owners Say ESG Improves Investment Returns
"Sixty-eight percent of asset owners globally believe the integration of [environmental, social and governance (ESG)] strategies has significantly improved returns, ... 80% reported having some form of [ESG] strategy in their portfolios.... Only 17% of survey respondents reported that more than 50% of their total assets have exposure to ESG factors; 39% said between 25% and 49% of their assets have exposure; and 44% said between 1% and 25%." (Pensions & Investments)
Industry-Wide Shift as Investors Find Sustainable Value Through ESG
"[T]raditional obstacles to environmental, social and governance (ESG) investing are fading, while one significant barrier remains: the lack of transparent, standardized and quality data.... [N]early all ... institutional investors surveyed want companies to explicitly identify ESG factors that materially affect performance, while 60 percent note a lack of industry standards for measuring ESG performance as a significant barrier to full integration." (State Street Corporation)
[Opinion] Stupid Public Pension Trends: Divestment Expands
"Once the California politicians are done going through removing all the deplorables from being considered from pension investments, they'll be left with some artisanal gluten-free bread company in Vancouver.... [P]oliticians have no fiduciary duty to the pension funds.... In some of these cases, the 'dirty' investments should not be invested in, because the financial outlook is bad. But in some of the cases the depth of analysis seems to be 'we think this stuff is bad, so obviously it can't keep making money.' " (STUMP)
Millennials Could Drive More ESG Investing
"Overall slightly more than half (51%) of Millennials say they view ESG/impact investing ideas favorably, while just 37% of Gen Xers and 32% of Baby Boomers agree. Millennials are also far and away the most likely to say their investments' impact on society and the environment should be among the most important and primary considerations when building portfolios." (PLANSPONSOR)
[Guidance Overview] New Guidance Restores 1994 ERISA Proxy Voting Interpretation
"IB 2016-1 states that if a fiduciary concludes that there is a reasonable expectation that shareholder engagement on ESG issues is likely to enhance shareholder value, after taking the costs involved into account, a fiduciary can, consistent with under ERISA, take into account ESG impacts in proxy voting and shareholder engagement.... The DOL also sought to lower the threshold for shareholder engagement activities, by changing the standard from the plan fiduciary having a reasonable expectation that such activities 'will enhance the economic value of the plan's investment' to 'is likely to enhance the value of the plan's investment,' restoring the original language of IB 94-2." (Morgan Lewis)
[Guidance Overview] DOL Clarifies Proxy Voting Interpretation, Considers ESG Investments
"Consistent with other recent guidance, IB 2016-1 further provides that a statement of investment policy can include policies concerning economically targeted investments or incorporating environmental, social, or governance (ESG) factors. IB 2016-1 states that if a fiduciary concludes that there is a reasonable expectation that shareholder engagement on ESG issues is likely to enhance shareholder value (after taking the costs involved into account), a fiduciary can -- consistent with ERISA -- take into account ESG impacts in proxy voting and shareholder engagement." (Morgan Lewis)
[Guidance Overview] DOL Clarifies Fiduciary Standards on Proxy Voting and Investment Policies (PDF)
"In response to concerns that prior guidance has unduly discouraged fiduciaries from exercising shareholder rights, the DOL issued guidance clarifying fiduciary duties on proxy voting and investment policy statements. The guidance also reiterates DOL's acceptance of applying environmental, social and governance policies to investment strategies. Plan fiduciaries wishing to increase shareholder engagement have room under this guidance to do so." (Conduent)
[Guidance Overview] DOL Issues Interpretive Bulletin 2016-1 on Voting of Proxies on Securities Held in Employee Benefit Plan Investment Portfolios
"According to the DOL, when proxy voting involves high costs or unusual requirements, the plan fiduciary should: [1] Consider whether the plan's vote, either by itself or together with the votes of other shareholders, is expected to have an effect on the value of the plan's investment that warrants the additional cost of voting. [2] When deciding whether to purchase shares, consider whether the difficulty and expense in voting the shares is reflected in their market price." (Practical Law Company)
[Guidance Overview] DOL Revisits, Relaxes Retirement Plan Proxy Voting Guidance
"[T]he pendulum appears to have swung back in a direction of greater flexibility for fiduciaries that may want to consider investment factors other than pure return on investment; flexibility not only in the selecting of investments, but in using the power of their proxies." (Ascensus)
[Guidance Overview] DOL Reinstates Modified Version of 1994 Guidance on Exercise of Shareholder Rights, Including Proxy Voting
"While the 2008 guidance was intended to update and clarify the 1994 guidance, the changes have -- in the DOL's view -- 'been misunderstood' ... According to the DOL, some have read the 2008 guidance to prohibit ERISA plans from exercising shareholder rights, including voting of proxies, unless the plan performed a cost-benefit analysis and concluded that the particular action was more likely than not to increase the value of the plan's investment.... By reinstating a modified version of the 1994 guidance, the DOL seeks to correct misperceptions about its position and encourage the exercise of shareholder rights." (Thomson Reuters / EBIA)
Change in Fiduciary Rules to Encourage Social Investing by Pension Funds Sought at OECD (PDF)
"[At] the December meeting of the OECD WPPP, a new paper supporting the enhanced use of ESG factors ... questions whether the traditional fiduciary rule ... is too 'narrow' and hindering the application of ESG factors in investing, and therefore should be modified ... Indications are that the proponents of ESG investing will continue to try to push for pension funds to invest based on ESG factors[.]" (Groom Law Group)
ESG Investing in 2017: Three Things to Know
"[1] An increasing number of scoring, indexes and rating systems are emerging to support a growing [environmental, social and corporate governance (ESG)] values and belief system.... [2] ESG related investments offer competitive returns ... [3] Investors born in the 1980s and 1990s are among the most active investors in ESG trends at 93 percent. That compares with 68 percent of Gen Xers and 51 percent of baby boomers who say that social or environmental impact is important when making investment decisions[.]" (InsuranceNewsNet.com)
EU Workplace Pensions Now Required to Incorporate ESG Issues
"The new pensions directive stipulates that: ESG criteria [are] to be considered in investment decisions and their practical implementation should be disclosed in regular reports.... The integration of ESG considerations will not be considered as conflicting with fund managers' fiduciary duties." (Latham & Watkins)
Impact Investing: What Role for Defined Contribution Plans? (PDF)
"Impact investments can be viewed as an offshoot of socially responsible investing (SRI) and have the stated intent of delivering measurable social impact, as opposed to the traditional SRI approach of avoiding and selling out of businesses that negatively impact the social good.... [W]hile impact investing is a trend that deserves continued close monitoring -- with some estimating the potential for it to be a trillion dollar market by 2020 -- there are meaningful barriers that are limiting its role within ERISA defined contribution plans." (Prudential)
Investors Unsure of ESG Benefits
"[In a survey of] 90 U.S. institutional asset owners, wealth managers and defined benefit consultants ... 30% said environmental, social and governance factors drive alpha, while 37% said they do not, and the remaining 33% said they are unsure.... 33% of respondents said ESG investing helps mitigate portfolio risk, while 40% said it does not and 28% said they are not sure.... [O]nly 17% of investors are satisfied with the quality and amount of ESG information provided by companies." (Pensions & Investments)
New Developments in Social Investing by Public Pensions
"Public pension funds continue to engage in social investing, most recently divesting from Iran and fossil fuels. However, social investing is often not effective, as other investors step in to buy divested stocks. Social investing can also produce lower investment returns, conflict with the views of beneficiaries and taxpayers, and interfere with federal policy. In short, public pension funds should not engage in social investing." (Center for Retirement Research at Boston College)
Why Socially Responsible Investing Is Now Important for Your 401(k)
"Recently Morningstar ... introduced Sustainability Ratings to gauge an investment's adherence to [socially responsible investment (SRI)] principles.... A recent U.S. Trust survey found SRI factors are important to 93% of millennials when making an investment decision. Your 401k plan can have greater value to your employees if you begin sharing Morningstar's Sustainability Ratings for your 401k investment options." (Lawton Retirement Plan Consultants)
Pension Plan Assets Fall as Payouts Rise
"Corporate pension plans in North America continued making large lump-sum payouts last year, helping push the total assets of the world's largest 300 pension plans down 3.4% in 2015, according to research by Willis Towers Watson. The decrease was the first in five years for the 300 plans, whose assets had steadily grown since the recession. The drop compares to an increase of the same amount -- 3.4% -- in 2014. The 300 private, public and sovereign pension funds hold a total of $14.8 trillion in assets, with about $6.5 trillion of that in North America." (The Wall Street Journal; subscription may be required)
OECD Focus on Pensions: ESOPs Acknowledged, Social Investing Promoted (PDF)
"The Organisation for Economic Cooperation and Development (OECD) Working Party on Private Pensions (WPPP) ... [final version of] its Core Principles of Private Pension Regulation... added, following comments by numerous US and European stakeholders, acknowledgement of US-style ESOPs.... This [article focuses] on the new ESOP provisions in the Core Principles, the beginning of apparent advocacy of ESG investing by pension funds, and a few of the other areas that are beginning to attract the attention of the WPPP." (Groom Law Group)
The Continuing Battle Over Economically Targeted Investments
18 pages. "As a matter of statutory interpretation, IB 2015-01, like its predecessors, is unpersuasive. [ERISA] requires plan trustees to invest 'solely' to provide participants' retirement benefits. A trustee who invests in ETIs violates this statutory obligation by pursuing collateral economic benefits for persons other than plan participants. As a matter of policy, the social investing which ETIs exemplify is unsound. At best, such social investing in practice merely shuffles investment ownership without altering market-based allocations of capital." (Prof. Edward Zelinsky, via SSRN)
[Guidance Overview] IRS Introduces Method for Plan Document Providers to Request Correction of Clients' Failure to Timely Adopt Pre-Approved Plans
"Previously, the only way an employer could correct not signing a pre-approved defined contribution (DC) retirement plan by the deadline was to complete a submission under the Voluntary Correction Program (VCP) ... A new option ... allows the financial institution or service provider that offers the plan document to request a closing agreement on behalf of all adopters who missed the deadline." (Internal Revenue Service [IRS])
Should Your 401(k) Plan Offer ESG Investment Options?
"At the very least, your Investment Committee should have a discussion about the topic.... The most persuasive reason your Investment Committee should consider ESG investment options in your 401(k) plan? Your employees. ThinkAdvisor cites a Morgan Stanley study that shows 71% of individuals are interested in [socially-responsible investing (SRI)]. For the millennial group, that response is greater than 80%." (Lawton Retirement Plan Consultants)
Colorado Senate Passes Bill Requiring Retirement System to Divest Companies Boycotting Israel
"HB 1284 calls for the Denver-based retirement system to identify international companies with economic prohibitions against Israel in which it has direct investments by Jan. 1, 2017, and under certain circumstances, withdraw from those investments. Companies would be given an opportunity to cease their prohibitions against Israel before funds are withdrawn." (Pensions & Investments)
[Guidance Overview] Thoughts About Recent DOL Guidance on ESG Factors and ERISA
"In the updated guidance, the DOL uses a number of key words and phrases that are helpful to focus on as fiduciaries consider applying ESG criteria to investment selections or making economically targeted investments. Three of these key concepts are collateral benefits, tiebreakers, and primary analysis." (Calvert Investments)
CalPERS Starts Process of Revamping ESG Program
"CalPERS' investment committee plans to vote on a new ESG plan for engaging its external managers and public companies in which it invests by August.... The private equity portfolio team members also stated the extent to which private equity companies use ESG factors in assessing portfolio companies is playing a role in determining which firms are hired by [CalPERS]." (Pensions & Investments)
The Year in Retirement Investing Trends for DC Plans
"From a fundamental rethinking of the role of ESG investing to ongoing money market fund reform, there was no shortage of major shifts for defined contribution plan investment menus in 2015." (PLANSPONSOR)
[Guidance Overview] DOL Issues Interpretive Bulletin on Social Investing
"An important purpose of [Interpretive Bulletin 2015-01] is to clarify that plan fiduciaries should appropriately consider factors that potentially influence risk and return. Environmental, social, and governance issues may have a direct relationship to the economic value of the plan's investment. In these instances, such issues are not merely collateral considerations or tie-breakers, but rather are proper components of the fiduciary's primary analysis of the economic merits of competing investment choices. At a minimum, this seems to say that not only could a fiduciary consider matters unrelated to investment performance, it could make those the matters the most important factor." (Winston & Strawn LLP)
ESG Interest and Implementation Survey (PDF)
10 pages. "Twenty-nine percent of all survey respondents have 'incorporated ESG factors into decision making,' ... up from 26% in 2014 and 22% in 2013. An additional 11% are currently considering doing so.... [P]ublic funds saw a material uptick in incorporation relative to a year ago (15% in 2013 to 27% in 2015). Corporate funds have the lowest overall integration of ESG factors at 15% in 2015, but this figure is substantially different for corporate defined contribution plans (24%) and corporate defined benefit plans (7%)." (Callan Associates)
ESG Interest and Implementation Survey (PDF)
10 pages. "Twenty-nine percent of all survey respondents have 'incorporated ESG factors into decision making,' ... up from 26% in 2014 and 22% in 2013. An additional 11% are currently considering doing so.... Corporate funds have the lowest overall integration of ESG factors at 15% in 2015, but this figure is substantially different for corporate defined contribution plans (24%) and corporate defined benefit plans (7%)." (Callan Associates)
[Guidance Overview] DOL Clarifies Proper Use of Economically Targeted Investments
"The [DOL] recently revised its guidance on economically targeted investments (ETIs), which are investments that support environmental, social or corporate governance (ESG) goals. The revision is intended to correct possible misperceptions about earlier guidance that might be discouraging pension fiduciaries from selecting such investments. This latest guidance reaffirms that fiduciaries may not choose ETIs with lower expected returns than non-ETIs with similar risk characteristics, but they may take into account social, environmental or governance advantages where expected returns and risks are comparable." (Towers Watson)
DOL Weighs in on ESG: Key Takeaways from Interpretive Bulletin 2015-01 (PDF)
"While sustainable investing previously attracted investors that directed their investments based on personal values, the DOL is acknowledging that many strategies that incorporate ESG factors today do so with economic motivations, and have investment beliefs and datasets to support the theory that they can earn superior returns within acceptable levels of risk by examining securities through factors tied to environmental sustainability, social betterment, or strong corporate governance." (Callan Associates)
What Men Can Learn From Women About Saving for Retirement
"Women were 14 percent more likely to participate in 401(k)s and other defined contribution plans than men. Women were also less likely to trade frequently, a practice that can erode returns. And despite having a reputation for being risk averse, women were just as likely as men to own equities[.]" (NBC News)
[Opinion] Whose Responsibility is Socially Responsible Investing?
"Two things, at least, are troublesome here. One is EBSA's inconsistency over time in the emphasis it places on fiduciary caution, and the embrace of investment considerations that have little if anything to do with generating returns for participants and beneficiaries. Second is the unmentioned, but no less real, matter of just what is 'socially responsible.' One need look no farther than America's democratic political system to know that there is no fool-proof consensus on what is moral, ethical, or socially responsible." (Todd Berghuis, for Ascensus)
[Opinion] Politics and Investment Options Don't Mix
"From 2004 to 2009, Amex Oil and Amex Tobacco outperformed the S&P 500 with positive returns on investment, while three out of four of the Socially Responsible Investing (SRI) funds we measured produced negative returns that were even worse than the S&P 500. This is not to say that 'sin' funds always outperform socially responsible funds, but pension fund managers would be failing their fiduciary duty by judging an investment on politically correct, socially conscious factors that may have nothing to do with economic performance. The Department of Labor should be obligated to investment and product neutrality, lest they ruin the retirement plans of many." (National Center for Policy Analysis [NCPA])
Completing the Analysis: ESG Integration
"[I]ntegrating ESG criteria into the investment process is a sound strategy as a growing body of research highlights the material impact that ESG factors have on a company's long-term performance.... [It] is critically important to understand that ESG analysis is not simply a screening approach that confines the investment universe and excludes certain investments. Rather, it is an active investment process utilized to provide an additional context for analysis.... [T]his paper provides an overview of ESG factors, while also discussing how investors are incorporating them into the investment process." (NEPC)
Climate Change and Pension Fund Investments
"The Sustainability Accounting Standards Board is in the process of developing ways of measuring the magnitude and probability of different types of economic and financial impacts of climate change. As those tools are refined and become applicable to all of the industries in which pension funds might invest, fiduciaries of those funds will be better able to deploy their funds' capital in ways that will ensure their ability to provide future retirement income by more clearly understanding the long-term risks and rewards presented by climate change." (Cooley LLP)
[Guidance Overview] DOL Issues New Guidance on Economically Targeted Investments
"[IB 2015-01] clarifies that no special documentation is presumptively required to demonstrate that ETIs or consideration of ESG factors complies with ERISA. That being said, the DOL guidance notes that fiduciaries responsible for plan investments should maintain records sufficient to demonstrate their compliance with ERISA's fiduciary standards and that the appropriate level of documentation depends on individual facts and circumstances." (Morgan Lewis)
[Opinion] California's S.B. 185, Thermal Coal, and the Fallacies of Social Investing
"[California Senate Bill no.] 185 requires public employee pension plans to divest their investments in publicly-traded companies that derive half or more of their revenue from 'the mining of thermal coal.' ... [T]he social investing mandated by S.B. 185 is a misguided way to pursue environmental or other worthwhile goals. Social investing by pensions is both wrong as a matter of law and ineffective as a matter of policy." (Prof. Edward Zelinsky, OUPblog)
[Guidance Overview] DOL Reinstates 1994 Guidance on Economically Targeted Investments
"The new guidance (like the 1994 guidance on which it is based) lays out the basic fiduciary rules for selecting plan investments, including the DOL's position that the exclusive benefit rule prohibits fiduciaries from subordinating participants' and beneficiaries' interests in their retirement income to unrelated objectives." (Thomson Reuters / EBIA)
DOL Warms to Considering Social Responsibility in Selecting Investment Funds
"The DOL reiterated that economic features should remain the primary focus of plan fiduciaries, but other factors can and should be taken into account in the following circumstances: Tie-Breaker for Economically Equivalent Funds.... Economic Impact of the Socially Responsible Focus.... [T]he DOL emphasized that no additional evaluation or documentation is required for socially responsible funds." (Mazursky Constantine LLC)
[Guidance Overview] DOL Announces Guidance on Social Investments (PDF)
"The basic text of IB 15-01 is virtually identical to IB 94-01. But the DOL seems to have gone a bit further in the preamble. There, DOL expresses the view that ESG factors are not merely collateral considerations, but can be an integral part of the economic analysis performed by the plan fiduciary when considering an investment. The preamble to IB 2015-01 explains that plan fiduciaries may address ETIs or incorporate ESG factors in investment policy statements and utilize ESG-related tools, metrics, and analyses to evaluate investments." (Groom Law Group)
[Guidance Overview] DOL Liberalizes Rules for Economically Targeted Investments
"IB 15-01 reflects that the DOL of the Obama administration believes the DOL of the Bush administration went too far by suggesting that additional fiduciary processes are required before investing in an ETI.... IB 2015-1 does not greenlight ETIs.... But it does make clear that fiduciaries should not be at greater risk for investing in funds that are constructed by non-economic criteria when the fiduciary has determined the funds are prudent investments under economic criteria." (Kilpatrick Townsend)
[Official Guidance] Text of EBSA Interpretive Bulletin 2015-01 Relating to the Fiduciary Standard Under ERISA in Considering Economically Targeted Investments (PDF)
11 pages. "In this document, the Department withdraws Interpretive Bulletin 08-01 and ... reinstates the language of Interpretive Bulletin 94-01.... The Department believes that in the seven years since its publication, IB 2008-01 has unduly discouraged fiduciaries from considering ETIs and ESG factors. In particular, the Department is concerned that the 2008 guidance may be dissuading fiduciaries from [1] pursuing investment strategies that consider environmental, social, and governance factors, even where they are used solely to evaluate the economic benefits of investments and identify economically superior investments, and [2] investing in ETIs even where economically equivalent....

"The Department also has concluded that the same standards set forth in sections 403 and 404 of ERISA governing a fiduciary's investment decisions ... apply to a fiduciary's selection of a 'socially-responsible' mutual fund as a plan investment or, in the case of an ERISA section 404(c) plan or other individual account plan, a designated investment alternative under the plan.... The bulletin does not supersede the regulatory standard contained at 29 CFR 2550.404a-1, nor does it address any issues which may arise in connection with the prohibited transaction provisions or the statutory exemptions from those provisions."

[Also available: News Release and Fact Sheet.]

(Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])

Investment Managers Seek Consensus on Use of ESG Factors
"As debate continues, funds such as CalPERS are working environmental, social and governance factors into their investment process.... 'As a practical matter, the definition of fiduciary duty has not changed,' notes [James Andrus], a portfolio manager on the global governance team at $286 billion CalPERS. 'But the view has developed over the past ten years that if you are a long-term investor, you have to take environmental, social and governance factors into consideration because of the adverse implications of not doing so.' " (Institutional Investor)
Fiduciaries of Large Pension Funds Fire Back at Share-Buyback Policies
"The chief financial officers of two large states and two large cities on Wednesday issued an open letter in their role as pension fiduciaries criticizing the practice of share-buybacks by corporations and questioning whether companies 'are adequately reinvesting for sustainable returns over the long term.' The four financial officers -- from New York state, New York City, Chicago and California -- are fiduciaries to pension funds with $860 billion in assets, covering 4.3 million participants[.]" (Pensions & Investments)
Largest U.S. Pension Funds Divided on Use of Shareholder Activism
"Decades ago, Calpers became one of the first U.S. pensions willing to publicly challenge companies' policies and performance while Calstrs had little presence in the activist world. Those roles flipped in recent years amid a new wave of investor activism. Calpers kept its disagreements with companies mostly behind closed doors while Calstrs publicly called for breakups, sales and other operational changes sought by activist funds -- and in some cases invested side-by-side with them." (The Wall Street Journal; subscription may be required)
For Public Pensions, Fossil Fuel Divestment Offers No Easy Answers
"Treasurers, legislators and fund managers must ask themselves whether divestment hurts performance -- and if so, how that squares with their fiduciary duty. Given the consensus that climate change is a threat, do public retirement schemes have any business profiting from traditional energy producers? Is divestment or investor engagement the best way to influence companies' behavior? ... Massachusetts is one of three U.S. states wrestling with these questions." (Institutional Investor)
[Guidance Overview] IRS Employee Plans News 2014-23, December 16, 2014 (PDF)
Topics include: [1] Certain funding elections for Cooperative and Small Employer Charity Act and eligible charity plans due December 31 2014; and [2] Informational Forms 5500 and 5500-SF, and final Form M-1. (Internal Revenue Service [IRS])
Pension Fund Activists Focus on Climate Change, Diversity, Director Nomination Process, with New York City Funds in the Lead
"The city comptroller, Howard M. Stringer, was elected in November 2013, along with the new high-visibility mayor (Bill DeBlasio). Under Comptroller Stringer's direction, the fund(s) are filing proxy proposals with 75 companies to demand a greater voice in the nomination of boards of directors. This is [being] characterized as 'giving shareowners a true voice in how boards are elected'." (Governance & Accountability Institute)
Pension Funds Feel Heat on Climate Change Issue
"Pension funds have used their investment clout for targeted social goals, notably divestments or stock boycotts of apartheid South Africa and tobacco. Curbing the use of carbon-emitting fossil fuels said to be disastrously warning the climate is a much larger global undertaking." (Calpensions)

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