Socially Responsible Investing Under Attack?
Some of you may have heard about two new interpretive bulletins issued by the Department of Labor, championed by the US Chamber of Commerce, offering clarification on the use of supposed “non-economic factors” in the investment of pension funds governed by Employee Retirement Income Security Act (ERISA) regulations. Various elements of the media have suggested that this is a “thumbs down” to the use of Socially Responsible Investing (SRI) investment criteria. This is matter of some disagreement. Here is a link to the story.
I think that the current economic crisis underscores the reality that environmental, social and governance (ESG) factors clearly are indeed (in many cases) “economic factors.” So I’m not sure the claims of these media stories is particularly accurate. Had dutiful, “fiduciary” trustees - particularly in long-term focused ERISA plans - looked beyond Wall Street dogma to consider the economic implications of certain “social” (dare I say “moral”) factors at work in the markets, we very well might not be having this conversation. In fact, we may well be coming close to the day when a REFUSAL to look at the potential economic implication of ESG issues may be deemed a BREACH of fiduciary duty.
These stalwart defenders of the American worker/retiree interest should have joined with faith-based and socially concerned investors in asking serious questions about the implications of the questionable and convoluted practices in the financial services industry. (See this link to a release from the Interfaith Center on Corporate Responsibility on the financial crisis) The Department of Labor’s “just show me the money” measuring stick has broken under the weight of reality and self deception. They can continue to look backwards while trying to move forward or they can learn from the past in an effort not to repeat these mistakes. I don’t think such sweeping claims about SRI - particularly at this time of economic crisis - is either accurate or in the long-term interest of American beneficiaries.
If the Department of Labor wants to worry about political involvement/influence they’d be better served to look within their own systems and the perspectives from which they draw policy, than in the SRI community/investment options. Where were these fiduciary paragons while our markets were rushing toward disaster?
