Economy and Society: Retiree advisers, AARP question Labor Department’s ESG proposal – Ballotpedia News Ballotpedia NewsEconomy and Society: Retiree advisers, AARP question Labor Department’s ESG proposal – Ballotpedia News Ballotpedia NewsEconomy and Society: Retiree advisers, AARP question Labor Department’s ESG proposal – Ballotpedia News Ballotpedia News
Impact Investing Forum 2022
London. April 28-29, 2022.
Economy and Society is Ballotpedia’s weekly review of developments in corporate activism, corporate political engagement, and the Environmental, Social, and Corporate Governance trends and events that reflect the growing intersection between politics and business. ESG Developments This week in Washington, D.C. ESG Developments This Week In Washington, D.C. The Securities and Exchange Commission was identified as the main driver of ESG activity in the public/government sector. Roll Call also acknowledged that BlackRock, the world’s largest asset manager firm with nearly $10 trillion in assets under management, will drive ESG events in the private sector. “Activist shareholders may have the upperhand in holding companies more responsible on environment, social, and governance issues next year. This could be due to a combination pressure from BlackRock Inc. and other institutional investor and proxy voting rules at the Securities and Exchange Commission. BlackRock, the largest asset manager in the world, stated this week that it expects companies it invests in to provide more details about climate-related risks and increase board diversity beginning in 2022. BlackRock updated its proxy voting rules and stated that it will ask CEOs to explain how their business strategies are resilient in a “likely decarbonization pathway” and if global warming is limited below 1.5 degrees Celsius. The SEC issued guidance and rules, which will likely increase activist, ESG-focused investors’ chances to get companies more concentrated on public policy issues. It will also make it easier for shareholders and to shake up corporate boards. In May …., 1 replaced three directors at ExxonMobil Corp. BlackRock, which holds approximately $9.5 trillion in assets, said this week that it wants U.S. corporate boards reflect the changing society and workforce. BlackRock stated that company boards should strive to achieve 30 percent diversity in membership, have at least two directors who are female, and at least one who is a member of an underrepresented minority. The firm, which holds stakes in thousands upon thousands of companies around world, stated it could vote against directors who fail demonstrate a strong commitment towards mitigating climate risks and embracing diversity. According to the asset manager, it will support shareholder proposals on these topics if corporate executives resist change. This will give smaller activist investors more power in the next proxy season. The SEC has recently provided guidance that will allow shareholders to make stronger proposals. After the agency’s November legal bulletin on no action requests under Rule 14a-8, a provision authorized by the Securities Exchange Act of 1934, companies seeking to avoid shareholder votes on ESG matters face a greater burden to get the SEC to grant their requests. Gary Gensler (Democrat), said that it is more likely that companies will require them to vote on public policy issues like the environment or worker arbitration than it was under the Trump administration. This was due to the repeal of three legal bulletins between 2017 and 2019. Last month, the SEC adopted a final rule that requires companies to provide universal proxy cards for contested director elections. Investors will no longer be allowed to vote for the entire company’s slate of directors or just the dissidents. Companies have until Sept. 1, but some companies may opt in earlier than expected or face shareholder pressure to allow them more freedom in voting for directors . Other proposals are being considered by the SEC, including more guidance on reporting on material ESG concerns and possible enforcement actions. This task force was formed at the start of the Biden administration. ESG investors and companies are also waiting for the SEC’s potential rulemaking on climate risks disclosure for public companies. This topic has been the focus of lobbyists’ advocacy this year on ESG issues for companies that support or oppose ESG. This topic has been the main focus of lobbyists’ advocacy on ESG issues this year for companies that support and oppose ESG. Roll Call reports that both retirees and plan administrators are concerned about the proposed changes by Labor. They also worry about the potential impact they could have on retirement investments. “The largest trade group for pension professionals asked the Labor Department to clarify a proposed rule that would allow retirement plan advisors to consider environmental and governance factors when choosing investments. It claimed it could increase legal risks. The American Retirement Association, which includes more than 27,000 plan administrators and actuaries, as well as financial advisers and insurance professionals, expressed concern that advisers could face additional legal risks if they fail take into account the economic impacts of climate change and other ESG factors. “While the proposal does not give fiduciaries the right to pursue ESG objectives without regard to or indifferent to the investment’s underlying economic merits,” the ARA stated in a letter last month. While ARA stated it supported the rule’s intent to allow plan advisers to direct investments into ESG options more freely and that it was in line with its intent, the group expressed concern that advisers would be required to demonstrate why ESG factors were not taken into consideration when selecting investments under the safe harbor regulation. This creates a slippery slope to advisers who oversee larger plans and view avoiding litigation as a top priority when choosing plans. “We cannot stress enough how sensitive these stakeholders can be to possible litigation risk,” ARA stated. “This means that any language reasonably understood to suggest, or even suggest, a particular course of fiduciary approach or course of action will be interpreted as a directive, and will be reacted as such.” The 38 million-member organization said that the department should stress that the proposal does NOT establish a fiduciary standard less strict than the statutory standard. “The Department acknowledges that the duty of loyalty is one ERISA’s core principles to protect beneficiaries and participants. In a Dec. 13 letter, David Certner, AARP’s legislative counsel, and legislative policy director, stated that ESG factors should be used in the selection of investments. “Indeed these factors should be evaluated in a matter of course when they impact a fiduciary’s analysis of the economic merits of a specific investment, competing investment options, or investment policy” he stated. A paper by Stanford’s Rock Center for Corporate Governance outlines the Seven Myths of ESG. Cydney Posner, a lawyer who covers securities law at Cooley, LLP (a corporate legal firm), said that the authors attempted to dispel some of the most persistent and common myths about ESG. “Myth #1: ESG is Value-Increasing” “Myth #2 – A company’s ESG Agenda is Well-Defined, Board-Driven” (“Myth #5] ESG Ratings Accurately Measure ESG QUALITY” “Myth 7: Mandatory disclosure will solve the problem”
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