On April 23, 2018, the U.S. Department of Labor issued Field Assistance Bulletin No. 2018-1, which provides guidance on environmental, social and governance (“ESG“) issues.

The Bulletin’s stated purpose is to provide guidance to the Employee Benefits Security Administration’s to assist in addressing questions they may receive from ERISA plan fiduciaries and other interested stakeholders about two previous DOL bulletins, Interpretive Bulletin 2016-1 relating to exercise of shareholder rights and written statements of investment policy, and Interpretive Bulletin 2015-01 relating to “economically targeted investments.” The Bulletin notes that the DOL has a longstanding position that ERISA fiduciaries cannot sacrifice investment return or take on additional investment risk as a means of promoting collateral social policy goals. The Bulletin states that ERIS fiduciaries must always put the economic interests of the ERISA plan first in making investment decisions, and that fiduciaries “must not too readily treat ESG factors as economically relevant to the particular investment choices at issue when making a decision.” The Bulletin also notes that ESG issues could constitute material business risk or opportunities to companies that would be treated as economic considerations under generally accepted investment theories, and that to the extent ESG factors involve business risks or opportunities that are properly treated as economic considerations in evaluating alternative investments, the weight that the fiduciary gives to those factors should be “appropriate to the relative level of risk and return involved compared to other relevant economic factors.”

On March 8, 2018, the European Commission (“EC“) released an Action Plan on sustainable finance. The goal of the Action Plan is to provide a strategy on sustainable finance for the EU, and in particular to reorient capital toward sustainable investment, manage financial risks stemming from climate change, natural disasters, environmental degradation and social issues; and foster transparency and long-termism in financial and economic activity. The Action Plan builds on the priorities identified in the final report published in 2018 by the EU High-Level Expert Group on Sustainable Finance.

The key actions proposed in the Action Plan are: creating a unified classification system for sustainability, identified as the most important action of the Action Plan; creating standards and labels for green financial projects; clarifying duties of investment managers such as pension funds, insurance companies and asset managers to ensure they consider environmental, social and governance issues in investment decisions; incorporating sustainability in capital requirements for banks and insurance companies; and strengthening issuers’ sustainability disclosure and improving accounting rule-making to ensure accounting rules do not discourage sustainable investment. The Action Plan includes a timetable for all actions to be taken by the second quarter of 2019, and the first identified action is the tabling by the Commission of a legislative proposal in the second quarter of 2018 that will include tools allowing for the establishment of a sustainability classification system.

The European Commission’s press release announcing the publication of the Action Plan is available here and includes links to the full Action Plan, an FAQ document and a summary memo.

On February 28, 2018, a bipartisan bill was introduced in the U.S. Congress that would create a new, expanded U.S. development finance agency.  The bill, titled the Better Utilization of Investment Leading to Development, or BUILD Act, would create a new agency called the U.S. International Development Finance Corporation which would replace OPIC and would also take over some functions of USAID.  The bill was introduced simultaneously in the House by Republican and Democratic representatives and in the Senate by Republican and Democratic senators.

The bill would give the new agency additional powers that OPIC does not currently have and would also increase the amount of investment that can be made.  Under the bill, the maximum contingent liability of the new agency would be increased to $29 billion from OPIC’s current cap of $60 billion and would be adjusted regularly based on inflation.  In addition to providing loans and insurance, the new agency would have the power to make equity investments and make grants, neither of which OPIC has authority to do.  The bill would also move USAID’s Development Credit Authority, enterprise funds and Office of Private Capital and Microenterprise into the new agency.

The bill as introduced in the senate is available here.