In reversing Trump’s policies, President Biden’s administration presented a proposal to remove certain requirements for investing in retirement funds. This is a big win for ESG funds and asset managers, as it would allow the inclusion of a whole slew of funds that were previously frozen from retirement savings plans.

The rule that the Ministry of Labor plans to remove limited investments from pension plans and choose only funds based on financial factors, Financial Time reported. There is no strict ban on investing in ESG funds, but most employers have avoided them to avoid possible legal difficulties; only 2.9% of employer pension plans currently contain some form of ESG funds.

It is a change of rule which “gives definitively [companies] some reassurance that the labor department will not prosecute them if they take into account ESG factors such as climate risk, ”Michael Kreps, director of Groom Law Group, told FT. As far as ESG fund asset managers are concerned, “this is a definite victory,” Kreps added.

The Department of Labor oversees 401k funds and other retirement plans, and the proposal goes so far as to eventually require the retirement savings plan to actively consider climate change when investing.

“The new regulation proposed by the DoL is expected to significantly expand the capacity of [retirement] plan sponsors to offer funds focused on or including ESG as investment options for plan members, ”said Josh Lichtenstein, partner at Ropes & Gray law firm.

ESGA offers broad ESG investment opportunities

With a growing interest in ESG and a push for ESG options into new spaces like 401ks, ESG investing is on the forefront of the minds of many investors. A benefit for one segment of ESG investing is a benefit for the whole, and the growing attention to space by the Department of Labor indicates the increasingly important role that this particular type of investment is playing on. the steps.

The American Century Sustainable Equity ETF (ESGA) measures the ESG performance of a company, considering the environmental impact as one of the main qualification factors. However, it takes it a step further and also examines other ESG aspects, such as employee turnover and company leadership, to name a few. The fund invests in large cap US companies with significant growth potential and value that rank at the top of ESG indicators.

ACI’s proprietary model assigns a score to each security for financial metrics and a separate score for ESG metrics, then combines them for an overall score.

The highest rated stocks are selected from each sector, creating a portfolio with strong performance and higher ESG ratings than stocks in the S&P 500 Index.

The fund is a semi-transparent ETF, which means that allocations are disclosed on a quarterly basis, not daily. Since its last publication, ESGA has owned companies such as Alphabet (GOOGL), Home deposit (HD), and Microsoft (MSFT).

ESGA has a total annual fund operating expense of 0.39% and total assets of $ 149 million.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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