DOL’s Replacement ESG Rule Reaches White House

The Department of Labor’s rewrite of federal guidance on using environmental, social and governance factors when evaluating investments for retirement plans has arrived at the White House for review.

The draft rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” was submitted by the DOL’s Employee Benefits Security Administration on June 30 to the Office of Information and Regulatory Affairs. The OIRA typically has up to 90 days to sign off on new regulations, though reviews often wrap up in less than a month, meaning the rule could be released within weeks.

The DOL’s proposed rule for selecting plan investments lays out for plan sponsors a prudent process for investment selection that, when followed, would provide a presumption of compliance with the duty of prudence, one of the two key fiduciary duties, along with the duty of loyalty, under the Employee Retirement Income Security Act.

That proposal also states that “ERISA gives maximum discretion and flexibility to plan fiduciaries in selecting designated investment alternatives” and “when ERISA fiduciary decision-making follows a prudent process—such as the process reflected in the proposed regulation—arbiters of disputes should defer to fiduciaries under a presumption of prudence.”

The advancing ESG rule proposal is the latest step in a process that began in February 2025, with an executive order directing federal agencies to review regulations seen as government overreach. In May 2025, the DOL told the U.S. 5th Circuit Court of Appeals, amid ongoing litigation over the rule governing ESG factors established under former President Joe Biden, that it intended to rewrite the regulation, rather than defend or repeal it outright. That rule, published in 2022, allowed retirement plan fiduciaries to treat ESG factors as a tiebreaker between investment options that have otherwise identical financial values.

The new ESG draft may revert to the standard used during President Donald Trump’s first term, requiring fiduciaries to base investment and shareholder-rights decisions solely on financial considerations tied to risk-adjusted returns, rather than any other objectives.

Congress has been moving in parallel. In January, the House of Representatives narrowly passed the Protecting Prudent Investment of Retirement Savings Act, which would write a similar “pecuniary-only” standard into ERISA itself.

A companion bill introduced by Senator Bill Cassidy, R-Louisiana, has stalled in the Senate HELP Committee since last fall and is unlikely to pass.

Trump also signed an executive order in December 2025 directing the DOL to tighten fiduciary rules governing proxy voting and to increase transparency about plan sponsors’ use of proxy advisers. The department issued a technical release in April warning that proxy advisory firms may be subject to ERISA fiduciary standards and that proxy voting is a fiduciary act under the law that must be carried out “for the exclusive purpose of maximizing risk-adjusted return.”

It remains unclear whether the pending ESG rule will address proxy voting practices directly.

If finalized as expected, the rule would mark yet another reversal of Biden-era retirement policy. Once published in the Federal Register, there will be a public comment period before the rule is finalized.