The federal district court for the Northern District of Texas ruled that the U.S. Department of Labor’s 2022 amendments of its Investment Duties regulation that governs private-sector employee benefit plans did not violate the Employee Retirement Income Security Act of 1974 (ERISA) or the Administrative Procedure Act. The 2022 amendments included provisions that clarified that fiduciaries could consider environmental, social, and governance (ESG) factors such as climate change in risk and return analyses for investment decisions. The court rejected the argument by 26 states and several private plaintiffs that ERISA’s plain text foreclosed consideration of such “non-pecuniary” factors. The court also concluded that the 2022 amendments were not “manifestly contrary to the statute.” In finding that the amendments were not arbitrary and capricious, the court noted that it was “not unsympathetic to Plaintiffs’ concerns over ESG investing trends,” but that the Department of Labor had provided the required “minimal level of analysis” from which the agency’s reasoning in support of the regulation could be discerned.

Challenge to the U.S. Department of Labor's amendment of the Investment Duties regulation governing private-sector benefit plans.

Utah v. Micone

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Federal Court Upheld ERISA Regulation Allowing Benefit Plan Fiduciaries to Consider ESG Factors

Filed

United States of America

Texas

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Federal Court Upheld ERISA Regulation Allowing Benefit Plan Fiduciaries to Consider ESG Factors

Policy instrument

Just transition

Fossil fuel

Economic sector

Finance