The United States District Court for the Northern District of Texas denied a motion to dismiss by American Airlines Feb. 21 in a case involving investment decisions. The court found that the plaintiff plausibly alleged that “Defendants’ public commitment to [environmental, social, and governance] initiatives motivated the disloyal decision to invest Plan assets with managers who pursue non-economic ESG objectives through select investments that underperform relative to non-ESG investments.”

The Labor Department’s “ESG rule” – the Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights – took effect Jan. 30, 2023. The rule provides that a “fiduciary is not prohibited from selecting the investment, or investment course of action, based on collateral benefits other than investment returns. Texas is one of 25 Republican-led states appealing a decision rejecting their bids to block the rule.

The rule and the case involve ERISA plans, but there is concern that insurer investment could be subject to the same issues.

Post Details

Publish Date

February 26, 2024

News Type

  • Washington Weekly

Topics

  • ESG

Points of Contact
Tom Karol
Tom Karol
General Counsel - Federal