The language may seem mild, but the implications are immense. A U.S. Department of Labor (DOL) statement holds a key breakthrough for the future of responsible investment and sustainable markets.
In rescinding its 2008 bulletin on Economically Targeted Investments (ETIs) the DOL has just published an interpretive bulletin stating its intention is to clarify “that fiduciaries should appropriately consider factors that potentially influence risk and return.”
“Fiduciaries need not treat commercially reasonable investments as inherently suspect or in need of special scrutiny merely because they take into consideration environmental, social, or other such factors. When a fiduciary prudently concludes that such an investment is justified based solely on the economic merits of the investment, there is no need to evaluate collateral goals as tie-breakers” says a revised preamble to its 1994 guidance.
U.S. guidance is key for many global markets – like Japan, for example. In Europe, institutional investors have been leading in demanding non-financial information, which includes ESG material – from business. It has also become clear how important these issues are to the millenials – the future investors.
“This is a huge game changer for responsible investment in the United States, an exciting and welcome development ” says Fiona Reynolds, Managing Director of the Principles for Responsible Investment (PRI).