We now have an official effective date for the new ESG regulation.
While the Department of Labor unveiled its final rule on the consideration of environmental, social and governance (ESG) factors just prior to the Thanksgiving holiday, the regulation has now been officially published in the Federal Register, establishing the timeline for it to be effective.
Consequently, the rule—Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights—will now be effective Jan. 30, 2023.
Not So Fast…
While that sets the effective date for the bulk of the regulation, the final rule also provided for a delayed applicability until one year after publication for certain proxy voting provisions.
The DOL explains in the preamble that it is “persuaded that a delayed applicability of paragraph (d)(4)(ii) of the final rule is appropriate as it gives fiduciaries of plans invested in pooled investment vehicles additional time for reviewing any proxy voting policies of the investment vehicle’s investment manager; and also provides investment managers additional time to determine whether investing plans have adequately adopted their proxy voting policies, as well as assessing and reconciling, insofar as possible, any conflicting policies.”
In addition, the DOL says that it believes it is appropriate to delay application of paragraph (d)(2)(iii) to give additional time to plan fiduciaries to review proxy voting guidelines of proxy advisory firms and make any necessary changes in their arrangements with such firms.
As such, paragraphs (d)(2)(iii) and (d)(4)(ii) of the final rule apply on Dec. 1, 2023.