The United States Department of Labor’s Employee Benefits Security Administration released a Field Assistance Bulletin (FAB) this week outlining their stance on the responsibilities of private investment managers. The FAB states that, “ERISA fiduciaries must always put first the economic interests of the plan in providing retirement benefits.” IPFI could not agree more. The responsibility of the investment manager is to generate stable returns and reduce risk, not operate against the tide of the economy. The Department of Labor also states that, “fiduciaries of ERISA-covered plans must avoid too readily treating ESG issues as being economically relevant to any particular investment choice.” This point strikes that the core of the Institute for Pension Fund Integrity, speaking to the core principles of data driven investment and the avoidance of politically driven investment strategies.
Further in the FAB, the Department of Labor states that fiduciaries cannot use the funds under management to pay for exorbitant costs related to sponsoring proxy fights on environmental or social issues. In essence, the federal government is stating that it is the responsibility of the fiduciary to manage funds wisely and avoid irresponsible actions. IFPI could not agree more; there are certain actions that are unacceptable for fund managers, with the use of client funds for the sake of social investing being one of them. While ESG investments have proven to be profitable and responsible in certain cases, deviating from financially responsible investments for the sake of ESG investment is irresponsible when pensioners only have one option.
At IPFI, we advocate first for the health and financial security of pension funds, regardless of their public or private nature. IPFI also seeks the responsible management of contribution-based funds, as responsible management promotes high return on investment and stability in pension accounts. The United States Department of Labor has made clear through this FAB that fund managers are held to a high standard, both in the private and public sector.