On October 22, 2015, the U.S. Department of Labor (DOL) issued Interpretive Bulletin 2015-01 (“IB 15-01”), which provides clarification on the conditions under which a fiduciary of a plan that is subject to the fiduciary standards of the Employee Retirement Income Security Act of 1974 (“ERISA”) may invest plan assets in economically targeted investments (“ETIs”). Put simply, the conditions required for ERISA pension funds to able to invest in ETIs.
The guidance note substitutes the Bush administration’s language in the 2008 bulletin, (“IB 08-01”), which is widely considered to have had a startling effect on economically targeted investing and reinstates the 1994 guidance, (“IB 94-01”). The IB 94-01 allowed fund managers to consider social and environmental concerns in their investment decisions. The DOL cites the dissuading effect of the IB 08-01 language on fiduciaries propensity to consider ETI investments, one of the main reasons for switching back to the language of IB 94-01. This new guidance clarifies to fiduciaries that there are no additional considerations that fiduciaries must examine when contemplating ETIs. Instead, social benefit might serve as a “tiebreaker” when evaluating two investment opportunities that with the same potential financial return.
The Community Development Capital Alliance strongly supports this important guidance note for its ability to open the door for fund managers to consider social impact investments while satisfying their fiduciary duty to pension holders