Administration of Trump set to reverse regulation permitting retirement investments to factor in Environmental, Social, and Governance (ESG) aspects.
The Department of Labor (DOL) under the current administration has officially rescinded the ESG-focused regulation introduced during the Biden administration that allowed retirement plan fiduciaries to consider environmental, social, and governance (ESG) factors when making investment decisions for US retirement plans. This move reflects a clear shift away from the prior policy on ESG in retirement investments.
Key developments include:
- In May 2025, the DOL told a federal appeals court it would no longer defend the Biden-era rule permitting ESG considerations in fiduciary investment decision-making, following lawsuits by several Republican-led states challenging that rule.
- In August 2025, the DOL rescinded the 2021 supplemental statement that had discouraged fiduciaries from considering alternative assets or ESG factors in 401(k) plans. This repeal was prompted by a 2025 Executive Order from President Trump focused on expanding access to alternative assets in 401(k) plans and eliminating what it described as "stifling" regulatory guidance from the previous administration.
- The Executive Order requires the DOL to issue new guidance and potentially propose new rules or safe harbors by February 3, 2026, regarding fiduciaries’ duties under ERISA when offering asset allocation funds that include alternative assets. This indicates ongoing regulatory reform efforts aligned with reducing barriers to non-ESG investments and broadening investment options in retirement plans.
- The DOL is concurrently addressing other regulatory priorities on retirement plan reporting and disclosures as mandated by the SECURE 2.0 Act, but ESG-specific rules currently are being rolled back rather than replaced with new ESG-focused regulations.
The rescinded rule, finalized in 2023, enabled retirement fund managers to consider ESG factors in case of a tiebreaker between equal financial investment options. However, the DOL has stated that this restriction unnecessarily restrained plan fiduciaries' ability to weigh ESG factors.
The government has ended its defense of the ESG-focused regulation, and the Department of Labor (DOL) has been ordered to issue a new rule that will supersede the Biden-era requirement. It remains unclear what the agency will repropose regarding ESG and investment duties for ERISA fiduciaries.
The rule has been subject to legal challenges since its implementation, with Republican-led states collectively claiming that it undermined protections for the retirement savings of more than 150 million workers. In a recent filing with the 5th Circuit Court of Appeals, Daniel Winik, Labor Department Attorney, stated that the DOL has determined to reconsider the rule in question, including the possibility of rescinding it.
In February, a federal judge in Texas asserted that the rule was not undermining ERISA, but the rule's future remains uncertain as the DOL works on new guidance and potential regulations.
Read also:
- A Business Model Explained: Its Purpose and Benefits for Your Venture
- Deep-rooted reinforcement of Walkerhughes' acquisitions through strategic appointment of Alison Heitzman
- Unchecked Management of HP Dams Leads to Environmental Disaster: RTI Reveals
- Impact of Trump's Enforced Russia Sanctions Could Compel Putin's Decision-Making
%20aspects.){kind=link}