The U.S. Labor Department on Monday proposed new limits on retirement plan fiduciaries from voting on corporate proxies when they cannot specify an economic benefit, a change that would further efforts to curb financial industry support for environmental or social causes.
The proposal comes as many shareholder initiatives on topics like climate change have gained more backing.
Top investment managers had largely opposed another Trump administration proposal to make it harder for retirement plans to use funds focused on goals like investing in renewable energy.
Material provided by a Labor Department spokeswoman said the agency took action as institutional investors came to own 80.3% of the top 500 American companies as of 2017, up from 47% of the largest 1,000 in 1987, diminishing the influence of funds it regulates under the Employee Retirement Income Security Act.
Retirement plans under the law are private and employer-sponsored, like 401(k)s and pension plans. Some state pension plans also follow the department’s guidance, magnifying the importance of rule changes in Washington.
The department said it was concerned some fiduciaries and proxy advisers “may be acting in ways that unwittingly allow plan assets to be used to support or pursue proxy proposals for environmental, social, or public policy agendas that have no connection to increasing the value of investments.”
Sanford Lewis, an attorney representing groups that often file shareholder resolutions, called the action “a remarkable misstep” by the agency.
“Under the changes, funds would be prohibited from voting on proposals unless they could find a narrow economic justification, rather than a justification based on ethics, impact on society, or on corporate governance,” Lewis said.