It may seem like minutia to some, but new guidance issued by the U.S. Labor Department may open up additional impact or sustainability funds that can help tackle the challenge of development finance.
The change to the Employee Retirement Income Security Act of 1974 — a federal law that sets standards for pension and health plans — essentially removes a 2008 provision which was confusing, and had a chilling effect on impact and sustainable investing.
The new guidance aims to enable private pension fund managers to consider economic, environmental, social and governance concerns in addition to a financial return when making investments — a change that could unlock a significant source of capital for socially responsible businesses and funds.