On December 16th, The CFAP Sustainable Investing Thought Leadership Group hosted an event where William Duff and Brian Vargo, both members of the law firm Royer Cooper Cohen Braunfeld LLC (RCCB), discussed what ERISA’s fiduciary duties and how they apply to ESG investing, when and to whom they apply, and practical strategies used to guard against alleged breaches of fiduciary duties.

We had a lengthy conversation regarding the purpose of ERISA and the Department of Labor’s (DOL) recent focus on investment issues.  Although the new DOL rule set to take effect on January 12, 2021 with only a sixty-day review period and 95% of the 8,700 comments opposing the proposed changes, Bill felt the DOL’s use of the term “pecuniary” in this rule would result in pension plan trustees reconsidering investments that are primarily focused on providing environmental and social benefits as opposed to financial benefits.  

William Duff

Bill talked about the need for pension plan trustees to understand that they still have fiduciary responsibilities, even though the participants in defined contribution plans are making their own investment vehicle selections.  This led into a discussion on the status of choosing a sustainable investing traget date fund as the Qualified Default Investment Option (QDIA) in a 401k plan.

Brian Vargo

Brian discussed the fact that ESG investing generally is marked by differences of opinion and values, as well as the absence of clear regulatory definitions.  Brian is pointing out to his money management clients that the burden of ensuring that an ESG investment strategy is consistent with an adviser’s fiduciary duties largely falls to each adviser when designing and offering such strategies for their clients. 

Our next meeting is scheduled on Wednesday, January 27thMichael Young, the Director of Education at The US SIF Foundation, will discuss the Fundamentals of Sustainable and Impact Investment. 

The CFAP Sustainable Investing Thought Leadership Group provides a forum to advance the dialogue regarding the role of sustainable investing in today’s capital markets and beyond.  In particular, the group directs its attention to furthering an understanding and clarifying the risks and opportunities linked to environmental, social and governance issues.  

If you have any questions regarding this posting or becoming part of the CFAP Sustainable Investing Thought Leadership Group, please contact Michael Cosack at  cosackm@impactwise.us.

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