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Biden administration reverses Trump-era rule on ESG retirement investments

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The Labor Department is clearing a path for people to consider climate change and other environmental, social and governance factors when choosing retirement plans. The move reverses a Trump-era ruling that restricted financial firms to only consider how investments perform when determining what plans it would offer participants.

ESG funds purportedly screens companies for positive actions in the three categories that make up its namesake. But there’s heated debate in corporate America over whether ESG priorities help or hurt the bottom line.

“Companies that treat their employees better, that take care of the environment, that have women in the C-suite, all tend to perform better,” Kim Griego-Kiel previously told Straight Arrow News. Griego-Kiel is CEO of Horizons Sustainable Financial Services and an expert in socially-responsible investing.

“Claiming that this is about long-run shareholder value, claiming that this is about preparing for an energy transition, I think that those tautologies have been used as vehicles to advance agendas whose primary motivations were not at all oriented toward maximizing shareholder value in the end, even though they’re disguised in that language,” said Vivek Ramaswamy, founder of Strive Asset Management and a prominent anti-ESG voice.

Just as the Labor Department makes this change, the Securities and Exchange Commission is cracking down on funds claiming to be ESG. The SEC fined Goldman Sachs $4 million for failing to follow the company’s own ESG policies. Goldman Sachs has agreed to the fine without admitting fault.

“From April 2017 until June 2018, the company failed to have any written policies and procedures for ESG research in one product, and once policies and procedures were established, it failed to follow them consistently prior to February 2020,” the SEC wrote.

ESG has increasingly become a gray area as it grows in popularity, given there are no federal guidelines declaring a standard for ESG criteria. For now, financial institutions are tasked with setting their own practices for determining ESG factors before putting the label on a fund.

SIMONE DEL ROSARIO: THE LABOR DEPARTMENT IS CLEARING A PATH FOR PEOPLE TO CONSIDER CLIMATE CHANGE AND OTHER ESG FACTORS WHEN CHOOSING RETIREMENT PLANS, REVERSING A TRUMP ERA RULING THAT RESTRICTED FINANCIAL FIRMS TO ONLY CONSIDER HOW INVESTMENTS PERFORM.

ESG INVESTING PURPORTEDLY SCREENS COMPANIES FOR POSITIVE ENVIRONMENTAL, SOCIAL AND GOVERNANCE ACTIONS.

BUT THERE’S HEATED DEBATE IN CORPORATE AMERICA OVER WHETHER ESG PRIORITIES HELP OR HURT THE BOTTOM LINE.

KIM GRIEGO-KIEL, HORIZONS SUSTAINABLE FINANCIAL SERVICES: companies that treat their employees better, that take care of the environment, that have women in the C suite, all tend to perform better.

VIVEK RAMASWAMY, FOUNDER, STRIVE ASSET MANAGEMENT: claiming that this is about long run shareholder value claiming that this is about preparing for an energy transition, i think that those tautologies though have been used as vehicles to advance agendas whose primary motivations were not at all oriented toward maximizing shareholder value in the end even though they’re disguised in that language.

SIMONE DEL ROSARIO: AND JUST AS THE LABOR DEPARTMENT MAKES THIS CHANGE, THE SEC IS CRACKING DOWN ON FUNDS CLAIMING TO BE ESG.

THE SEC FINED GOLDMAN SACHS FOUR MILLION DOLLARS FOR FAILING TO FOLLOW THE COMPANY’S OWN ESG POLICIES, NOTING THAT FOR MORE THAN A YEAR, THE COMPANY DIDN’T HAVE ANY WRITTEN POLICIES AND PROCEDURES FOR ESG RESEARCH BEFORE MARKING A FUND ESG, AND ONCE ESTABLISHED, FAILED TO FOLLOW THEM CONSISTENTLY UNTIL 2020.

ESG HAS INCREASINGLY BECOME A GRAY AREA AS IT GROWS IN POPULARITY, GIVEN THERE ARE NO FEDERAL GUIDELINES DECLARING A STANDARD FOR ESG.

FOR NOW, COMPANIES ARE TASKED WITH SETTING THEIR OWN PRACTICES FOR DETERMINING ESG FACTORS BEFORE SLAPPING A LABEL ON A FUND.

I’M SIMONE DEL ROSARIO IN NEW YORK IT’S JUST BUSINESS.

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The Labor Department is clearing a path for people to consider climate change and other environmental, social and governance factors when choosing retirement plans. The move reverses a Trump-era ruling that restricted financial firms to only consider how investments perform when determining what plans it would offer participants.

ESG funds purportedly screens companies for positive actions in the three categories that make up its namesake. But there’s heated debate in corporate America over whether ESG priorities help or hurt the bottom line.

“Companies that treat their employees better, that take care of the environment, that have women in the C-suite, all tend to perform better,” Kim Griego-Kiel previously told Straight Arrow News. Griego-Kiel is CEO of Horizons Sustainable Financial Services and an expert in socially-responsible investing.

“Claiming that this is about long-run shareholder value, claiming that this is about preparing for an energy transition, I think that those tautologies have been used as vehicles to advance agendas whose primary motivations were not at all oriented toward maximizing shareholder value in the end, even though they’re disguised in that language,” said Vivek Ramaswamy, founder of Strive Asset Management and a prominent anti-ESG voice.

Just as the Labor Department makes this change, the Securities and Exchange Commission is cracking down on funds claiming to be ESG. The SEC fined Goldman Sachs $4 million for failing to follow the company’s own ESG policies. Goldman Sachs has agreed to the fine without admitting fault.

“From April 2017 until June 2018, the company failed to have any written policies and procedures for ESG research in one product, and once policies and procedures were established, it failed to follow them consistently prior to February 2020,” the SEC wrote.

ESG has increasingly become a gray area as it grows in popularity, given there are no federal guidelines declaring a standard for ESG criteria. For now, financial institutions are tasked with setting their own practices for determining ESG factors before putting the label on a fund.

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