DOL ESG Fiduciary Rule Whiplash: Three Reversals, 5 Years

The Department of Labor rewrote the fiduciary rules on ESG investing three times between October 2020 and 2025. Trump's first term issued a rule restricting ESG considerations in ERISA-covered plans. Biden's DOL reversed it. Trump's second term moved to revisit the Biden rule. Each cycle forced plan administrators to revise investment policy statements, retrain investment committees, and re-paper their fiduciary processes. ERISA-covered private retirement plans hold trillions in assets. The administrative cost of three regulatory reversals in five years has been real, and the substantive guidance for fiduciaries today is closer to "wait" than to any settled standard.

Key Findings

The October 30, 2020 Trump-era DOL final rule "Financial Factors in Selecting Plan Investments" (85 FR 72846) required ERISA fiduciaries to evaluate investments based only on "pecuniary factors," with limited exceptions.
The November 22, 2022 Biden-era DOL final rule "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights" (87 FR 73822) reversed the pecuniary-only framing and permitted ESG factors as part of a prudent risk-return analysis, with a tiebreaker provision for economically equivalent investments.
26 Republican state attorneys general challenged the 2022 rule in the Northern District of Texas in Utah v. Walsh (later Utah v. Su).
The Fifth Circuit on July 18, 2024 remanded the case to the district court for further review after the Supreme Court's Loper Bright decision changed the deference framework.
ERISA Section 404 (29 U.S.C. § 1104) requires fiduciaries to act "solely in the interest" of participants and beneficiaries, with the "care, skill, prudence, and diligence" of a prudent person.
The 2025 DOL under the second Trump administration signaled it would revisit the 2022 rule, leaving plan sponsors managing investments under a rule the agency has publicly distanced itself from.

What is ERISA fiduciary duty?

The Employee Retirement Income Security Act of 1974 governs private-sector retirement plans. Section 404 imposes two foundational duties on plan fiduciaries: the duty of loyalty (act solely in the interest of participants and beneficiaries) and the duty of prudence (the care, skill, prudence, and diligence a prudent person familiar with such matters would use). The exclusive-benefit rule means plan assets cannot be used for purposes other than providing benefits and paying reasonable plan expenses.

The fight over ESG investing happens inside this statutory frame. The text of ERISA does not mention "ESG," "environmental," "social," or "governance." What it says is "solely in the interest." Every DOL rule on ESG has been the agency's interpretation of what "solely in the interest" allows or forbids when a fiduciary considers climate exposure, board diversity, or labor practices.

That interpretation has now flipped three times.

Frances Perkins Building, U.S. Department of Labor headquarters in Washington DC — The Frances Perkins Building houses the Employee Benefits Security Administration, the DOL sub-agency that writes the rules ERISA fiduciaries must follow. Three EBSA rules on ESG factors in five years have produced compliance whiplash for the retirement plan industry. *Photo via Wikimedia Commons. CC BY-SA 4.0.*

What did the 2020 Trump rule do?

The October 30, 2020 final rule, published in the Federal Register on November 13, 2020 at 85 FR 72846, required ERISA plan fiduciaries to select investments based on "pecuniary factors" only. A pecuniary factor was defined as one that a fiduciary "prudently determines is expected to have a material effect on the risk and/or return of an investment based on appropriate investment horizons consistent with the plan's investment objectives and funding policy."

Non-pecuniary factors, the rule said, could be considered only as a tiebreaker when competing investments were economically indistinguishable. Even then, the fiduciary had to document the tiebreaker analysis in writing.

The practical effect was a chilling one. Plan administrators who had been integrating ESG considerations into their investment screens read the rule as a warning. Investment policy statements were rewritten to strip ESG language. Some plan committees pulled ESG funds from 401(k) menus to avoid the documentation burden and the litigation risk that came with explaining why an ESG-labeled fund had survived the pecuniary-factors test.

The rule's framing reflected the Trump administration's view that ESG investing prioritized political goals over participant returns. EBSA's preamble cited concerns about "asset managers and investment advisers" who might be tempted to subordinate "the financial interests of plan participants and beneficiaries to other goals."

What did the 2022 Biden rule do?

The Biden administration's DOL finalized its replacement rule on November 22, 2022 and published it on December 1, 2022 at 87 FR 73822. The title alone signaled the reframing: "Prudence and Loyalty" rather than "Financial Factors." Effective date: January 30, 2023.

The 2022 rule kept the prudent-person standard but rejected the pecuniary-only framework. A fiduciary, the rule said, "may consider any factor material to the risk-return analysis, including, if applicable, the economic effects of climate change and other environmental, social, or governance factors." The list was illustrative, not exhaustive.

The tiebreaker provision changed too. Where the 2020 rule allowed non-pecuniary factors as a tiebreaker only when investments were economically indistinguishable on a strict reading, the 2022 rule allowed collateral benefits to break a tie when competing investments "equally serve the financial interests of the plan." The standard relaxed. The documentation requirement loosened.

The rule did not require ESG consideration. It permitted it. That distinction matters legally but matters less in practice. Plan sponsors who had spent two years removing ESG language from their investment policy statements now faced consultants telling them the regulatory environment had shifted again.

Retirement savings documents and financial planning materials on a desk — Private-sector ERISA plans (defined-benefit pensions, 401(k)s, 403(b)s) hold the savings of tens of millions of American workers. Every DOL rule change on fiduciary investment selection cascades through plan committees, investment consultants, recordkeepers, and the menus those workers actually see. *Photo via Pexels. Pexels License.*

What are the courts saying?

26 Republican state attorneys general led by Utah sued in the Northern District of Texas to vacate the 2022 rule. The case was originally Utah v. Walsh (named for then-Labor Secretary Marty Walsh) and was later restyled Utah v. Su after Acting Secretary Julie Su took over. The plaintiffs argued the rule violated ERISA's exclusive-benefit standard by permitting fiduciaries to consider factors that were not strictly financial.

District Judge Matthew Kacsmaryk ruled for the DOL in September 2023, finding the rule was a reasonable interpretation of ERISA under the Chevron deference framework then in effect. The states appealed to the Fifth Circuit.

While the appeal was pending, the Supreme Court decided Loper Bright Enterprises v. Raimondo in June 2024, overruling Chevron. Agency interpretations of ambiguous statutes no longer get automatic deference. Courts now independently determine the best reading of the statute.

The Fifth Circuit issued its decision on July 18, 2024, remanding the case to the district court for further review under the new Loper Bright standard. The panel did not strike the rule. It told the lower court to redo the analysis without Chevron on the agency's side of the scale. The case has been working its way back through the lower courts since.

The remand left the 2022 rule technically in force but legally exposed. Plan sponsors watching the litigation had a choice: follow the rule as written, or follow it with one eye on a possible later vacatur. Most chose the cautious version of compliance, which looked a lot like the 2020 framework with different paperwork.

What does 2025 look like?

The second Trump administration's DOL signaled early in 2025 that it intended to revisit the 2022 rule. The agency's stated direction: pull back toward the 2020 pecuniary-only framework, with potential modifications. As of mid-2026, no replacement rule has been finalized.

The interim state is the worst of the three for fiduciaries. The 2022 rule is the operative regulation. The agency that wrote it has signaled it disagrees with it. The case challenging it is back at the district court under a new deference standard that disfavors the agency. Any plan sponsor making a long-horizon investment policy decision now is choosing among three legal frames, none of which is fully stable.

Investment consultants have responded by drafting "regime-neutral" investment policy statements designed to survive whichever rule ends up in force. These documents tend to look like the 2020 framework with hedged language permitting ESG consideration where it is "consistent with the plan's investment objectives" and "supported by quantitative analysis." That is a compromise between two regulatory regimes, which means it satisfies neither perfectly.

Stack of federal regulatory documents and the Federal Register — Three DOL final rules on ESG in five years, two Federal Register entries (85 FR 72846 and 87 FR 73822), one ongoing Fifth Circuit case, and a pending fourth rulemaking. Every cycle imposes drafting, compliance, and legal-review costs on plans that ultimately come out of participant returns. *Photo via Unsplash. Unsplash License (CC0).*

What this tells you about the model

ESG fiduciary policy is not a technical problem with a technical answer. It is a political battle being fought through agency rulemaking. The text of ERISA Section 404 has not changed since 1974. What changes is the administration. Each administration's DOL reads "solely in the interest" through a different lens, finalizes a rule, and watches the next administration reverse it.

The cost of the flip-flop is borne by the regulated parties. Plan sponsors pay for the legal review every time. Recordkeepers update their compliance materials. Investment committees attend additional training. Asset managers update fund disclosures. The expense ratios on the funds inside those plans are paid by participants, which means the cost of regulatory whiplash eventually reaches the worker's account balance.

The substantive disagreement (whether climate risk is a financial factor or a political factor) is real and reasonable people disagree about it. The procedural pattern (one rule, reverse rule, partial reversal, litigation, repeat) is what makes it expensive. A statute that has been on the books for over fifty years should not produce three different interpretive frameworks in five years.

The Loper Bright change makes the next round harder for whichever administration is in power. Agencies no longer get the benefit of the doubt on statutory ambiguity. Courts will read ERISA Section 404 themselves and decide what "solely in the interest" allows. That may eventually produce stability, or it may produce a third source of policy in addition to the two political parties, this time speaking through circuit splits and Supreme Court grants of cert.

Either way, the model is the same one we keep covering across the ESG world. A standard with no agreed-upon meaning, sold as if it had one. See the ESG Industrial Complex for the asset-management side of the same problem and BlackRock's NZAM exit for what happens when the largest signatories get tired of the political exposure.

The WokeCorp assessment

The commitment. The October 30, 2020 Trump-era DOL rule required ERISA fiduciaries to evaluate investments based only on "pecuniary factors." The November 22, 2022 Biden-era rule permitted ESG factors as part of a prudent risk-return analysis with a tiebreaker provision for economically equivalent investments.

The outcomes. 26 Republican state AGs sued in Utah v. Walsh/Su; the Fifth Circuit remanded the case on July 18, 2024 after Loper Bright overruled Chevron.

The core question. Three reversals in less than a decade on whether ESG factors count as permissible fiduciary criteria means the regulatory ground shifts under every long-term investment strategy. That's not a political observation. It's an investment risk.

Compare with The ESG Industrial Complex: $35T in Monetized Virtue.

Sources

Verified May 2026.

U.S. Department of Labor, Employee Benefits Security Administration, "Financial Factors in Selecting Plan Investments," Final Rule, 85 FR 72846, November 13, 2020.
U.S. Department of Labor, Employee Benefits Security Administration, "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights," Final Rule, 87 FR 73822, December 1, 2022.
Utah v. Walsh / Utah v. Su, U.S. Court of Appeals for the Fifth Circuit, No. 23-11097, decided July 18, 2024 (remanded to the U.S. District Court for the Northern District of Texas).
Loper Bright Enterprises v. Raimondo, 603 U.S. ___ (2024).
ERISA Section 404, 29 U.S.C. § 1104. Cornell Legal Information Institute.