Minerva Comment Letter on DOL/EBSA ESG Proposal

From the comment filed by Minerva Analytics on the DOL/EBSA ESG proposal (full text attached below):

The Proposed Rules stand in stark contrast to many OECD markets and appear to contradict decades of guidance from the DoL which has allowed ERISA-regulated retirement plans to invest responsibly and take ESG factors into account, under appropriately strict conditions.

Our understanding is that the purpose of ERISA is to protect the long-term interests of pension fund savers and sets a high bar for fiduciary responsibility, requiring trustees to “act with due care, skill, prudence and diligence, and to avoid conflicts of interest”.

ESG considerations have frequently been framed as political or socially motivated factors incompatible with Modern Portfolio Theory. Herein lies a problem – MPT is just that, a theory, not an iron-clad law of physics. The Friedman Doctrine exhorted that the only responsibilities of a corporation are to it shareholders – so long as they stay within the rules of the game. In the past 50 years the game has changed, as have the spectators – the shareholders. The growth of transparent data and information has enabled them to understand that companies which are not mindful of environment and social rules or treat their employees badly lose their licence to operate and ultimately fail.

Over the past 25 years we have seen an increasing volume of academic and actuarial studies and regulatory frameworks which have concluded that adding ESG considerations to the investment strategy is positive beneficial to long-term risk adjusted returns.


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