The US government has issued new guidance on the Employee Retirement Income Security Act of 1974 (ERISA) which will allow private pension funds to consider environmental, social and governance factors in additional to financial returns when making investment decisions.
In issuing the new guidance, the US Secretary of Labour, Thomas E. Perez, said, ‘Investing in best interests of a retirement plan and in the growth of the community can go hand in hand. We have heard from stakeholders that a 2008 department interpretation has unduly discouraged plan fiduciaries from considering economically targeted investments. Changes in the financial markets since that time, particularly improved metrics and tools allowing for better analyses of investments, make this the right time to clarify our position.’
The change in guidance follows a recommendation by the US National Advisory Board on Impact Investing and paves the way for pension fund trustees to make impact investment allocations.
In Australia, in its response to the final report on the Financial Systems Inquiry, the Australian Prudential Regulation Authority recently clarified their interpretation around trustee duty in support of impact investment, confirming that trustees have a wide remit to invest provided they remain focussed on delivering retirement benefits to members (read further here).
More information about the US development can be accessed at the United States Department of Labour website.