The U.S. Department of Labor said on Wednesday it will not enforce two rules finalized in the last days of the Trump administration that curb investments based on environmental and social factors and shareholder voting in corporate meetings.
The rules cover trillions of dollars in retirement accounts. Investors and their advocates criticized the business-friendly measures as misguided as they have pushed companies on corporate ballots to address issues ranging from systemic racism to climate change. More money is also flowing to managers that use environmental and social factors to select securities.
Trump administration officials had said the rules focused investment managers on retirees’ financial interests and “material” risks to returns, rather than possible political issues.
President Joe Biden has said government agencies should review regulations that do not protect the environment, bringing the rules under scrutiny.
Reuters first reported that the Labor Department was expected to not enforce the rules.
The Labor Department said it has heard from stakeholders that the rules created confusion and had a “chilling effect” on asset managers using environmental, social and governance factors to help guide investment decisions.
The Labor Department plans to revisit the rules.
The Trump administration rules created a perception that asset managers could run afoul of U.S. regulations if they exercised ordinary shareholder rights – like voting proxies – or if they included environmental, social and governance factors in analyzing investments, said Ali Khawar, principal deputy assistant secretary for the Employee Benefits Security Administration.