The U.S. Department of Labor has officially denied requests for an extension of the comment period for its new controversial proposals regarding ESG investment in ERISA plans, as well as the request for a public hearing on the matter.

In June 2020, the DOL released a new proposed rule that it described as aimed to ensure that plan fiduciaries in employer-sponsored retirement plans focus on financial objectives in their decision-making process, and not sacrifice performance for non-financial considerations. Specifically, the new rule would “make clear that ERISA plan fiduciaries may not invest in ESG vehicles when they understand an underlying investment strategy of the vehicle is to subordinate return or increase risk for the purpose of non-financial objectives,” according to a DOL statement.

The proposed rule has met significant resistance from investment managers and other ESG-focused market participants. Many have pointed out that the rule would create significant problems for investment managers’ ability to manage risk in client portfolios, and would ultimately be detrimental to the long-term performance of their investments. Several also maintained that the DOL’s reasoning was based on outdated information, citing extensive research exhibiting the outperformance of sustainable investing strategies over the past several years.

Despite the extensive criticism, the DOL has now refused requests to extend the comment period for the proposed rule, or to hold public hearings. Following the release of the proposal, Senator Patty Murray, a ranking member on the Senate Committee on Health, Education, Labor, and Pensions, sent a letter to the DOL requesting a public hearing and an extension of the comment period. In the letter, Murray wrote:

“These rules are too important to take shortcuts. A public hearing is critical to a thorough understanding in light of the reliance on another federal agency’s regulation, as well as the numerous proposals and changes the Department has made over the past month in delineating ERISA’s fiduciary duties.”

In his response, DOL Deputy Assistant Secretary rejected the request for an extension to the comment period, which officially ended August 6. Wheeler also refused a public hearing, writing, “After considering the request, the department believes that a public hearing is unnecessary for this proposed class exemption.”