Webcast Available Now – Stradley Ronon’s Diversity and Inclusion Committee Presents: A Candid Conversation with Hispanic Leaders

Stradley Ronon’s panelists of Hispanic leaders share insights into their career journeys and the challenges they’ve overcome along the way. The group discusses ways to combat discrimination and racism, and how the Hispanic community is currently underrepresented in leadership positions, especially in the legal profession.


Gisele Fetterman, Pennsylvania’s Second Lady
Renee Garcia, Managing Senior Counsel, PNC Bank
Sharon R. Lopez, Civil Rights Attorney, Triquetra Law
Rebecca Rodrigues, Associate, Stradley Ronon
Gabriella Leyhane, Associate, Stradley Ronon
Adriel J. Garcia, Associate, Stradley Ronon
Brian P. Seaman, Counsel and Chief Diversity Officer, Stradley Ronon


NJ Governor Signs Environmental Justice Legislation Placing New Requirements on Facilities Operating in Overburdened Communities

On September 18, 2020, Gov. Phil Murphy signed environmental justice legislation intended to address the disproportionate impacts of pollution on communities by restricting certain industrial operations from entering or expanding in those communities. The law is based on the premise that, and creates a new definition describing, certain communities are “overburdened” because they have historically been impacted, more than other communities within a geographic area, by operations that tend to generate pollution. These “Overburdened Communities” as now defined in the law, share at least one of the following characteristics:

  • at least 35% of all households are low-income households;
  • at least 40% of residents identify as minority or part of a recognized tribal community; or
  • at least 40% of households have limited proficiency with English.

The Department of Environmental Protection is charged with compiling a list of “Overburdened Communities” in the state. However, as described, the definition may be expected to encompass many, if not all, urban areas in the state where residences co-exist with industrial uses, as homes in such areas are typically the least expensive homes in an urban area to rent or own. Often, the housing stock proximate to such facilities was previously known as ‘worker housing’ and in some cases, was constructed by the owners of the industrial facilities and built either at the turn of the 20th century or during the post-World War II manufacturing boom. The current operations which are defined as “Facilities” targeted by the new law are the following: any major source of air pollution, resource recovery facilities, incinerators, sludge processing facilities or combustors, large sewage treatment plants, large transfer stations and solid waste facilities, recycling facilities receiving at least 100 tons of material per day, scrap metal facilities, landfills and some medical waste incinerators.

Under the new law, each of the above-described types of operations will be subject to additional layers of scrutiny whenever an application for a new facility permit, or an application for a major modification of an existing permit, or an application to expand operations is submitted to the Department for approval. The heightened review’s exact extent is not completely clear as the Department is required to promulgate regulations before the new review process commences. Still, there are two specific requirements of that process highlighted in the law. First, no application will be reviewed unless accompanied by an environmental justice impact statement, which does not have a specific definition in the law. That statement must include an assessment of the “potential environmental and public health stressors” that is, all sources of environmental pollution (whether avoidable or unavoidable) which may be expected to arise from the proposed operation, as well as any potential health conditions which the proposed operation may cause in the community. These conditions include asthma, cancer, elevated blood lead levels, cardiovascular disease and developmental problems. It is not known if the Department’s regulations will provide a methodology for determining, on a consistent scientific basis, reproducible evidence of connections between a Facility’s operations and adverse health impacts of nearby residents. The environmental justice impact statement must also contain a description of the environmental and public health stressors already present in the community.

Once the statement is prepared, it will be submitted to the municipality where the Facility is or will be located, and to the Department, who will post it on the Department’s website. The applicant will then hold a public hearing on the application at which the environmental justice impact statement will be presented, and comments will be solicited from the public. Following the hearing, the Department will consider the public’s testimony and determine whether there should be conditions placed on the permit being sought by the applicant in order to “avoid or reduce the adverse environmental or public health stressors affecting the overburdened community.” The law does not describe nor limit the type of conditions that the Department may impose, nor does it appear to limit the Department’s discretion to impose conditions to only address those adverse environmental or public health stressors caused by the Facility at issue.

There are several exceptions from the scope of the new law. Permit applications for remediation activities do not trigger the public hearing requirement and the possibility of additional conditions being imposed, even where minor pollution levels will be allowed to remain in the soil or groundwater. Further, certain provisions of the new law raise significant questions for regulated Facilities. It is not clear if the law’s public disclosures would constitute voluntary disclosures of violations under other state and federal laws. The enforceability of conditions imposed on industrial applicants which are based on the science underlying such a connection may be questionable. Modern science has yet to provide consistent and reproducible evidence of a direct connection between certain conditions and stressors identified in the law and potential health impacts on communities. Likewise, would meeting the conditions imposed by the Department, regardless of scientific foundation, be sufficient to protect the Facility from liability if health impacts are documented in the future? It will be necessary for the Department, charged with administering the law, to provide clarity and reasonableness when bringing the law’s admirable intent into real-world situations.

Webcast Available Now – ESG Regulatory Lens – A Guide for Private Fund Managers

In this webcast, we:

  • Provide an overview of ESG and how the strategies apply to the various types of private fund managers.
  • Give an update on the regulatory climate and legal developments for ESG from the US to Europe and Asia.
  • Provide a framework for approaching the development of an ESG process, including where to access useful tools and resources.


Trysha Daskam, Director & Head of ESG Strategy, Silver Regulatory Associates

John P. Hamilton, Counsel, Stradley Ronon

George Michael Gerstein, Co-Chair, Fiduciary Governance, Stradley Ronon


Women in ETFs Ring the Bell for Gender Equality

For the sixth consecutive year, a global collaboration across 80 exchanges (the total would be 100 this year but 20 events have been postponed or cancelled due to the Corona Virus as of March 6, 2020) around the world plan to ring opening or closing bells to celebrate International Women’s Day 2020 (Sunday 8 March 2020). The events – which start on Monday 2 March, and will last for two weeks – are a partnership between IFC, Sustainable Stock Exchanges (SSE) Initiative, UN Global Compact, UN Women, the World Federation of Exchanges and Women in ETFs, to raise awareness about the business case for women’s economic empowerment, and the opportunities for the private sector to advance gender equality and sustainable development. Read the full Newsletter here.

DOL releases significant ESG proposal – preliminary analysis

In response to perceived abuses, and acknowledging the rapid growth in environmental, social & governance (ESG) investing, the U.S. Department of Labor (DOL) issued a highly-anticipated notice of proposed rulemaking that would clarify the circumstances under which ESG investing, including the selection of ESG funds in plan lineups, may be conducted in a manner that accords with the fiduciary duties under Section 404 of the U.S. Employee Retirement Income Security Act of 1974, as amended (ERISA). This proposal comes just two years after the DOL issued Field Assistance Bulletin (FAB) 2018-01. It is also part of a continuum of ERISA-ESG guidance over the decades, across both Democrat and Republican administrations, that has sought to address how ERISA’s stringent fiduciary duties may be satisfied when one or more E (e.g., climate change), S (e.g., employee relations) and or/G (e.g., corporate governance) factors are pursued either because they are material to investment performance or because they further some public policy or similar goal.

If the proposal is adopted as-is, plan sponsors, other fiduciaries and the industry, will face a tall order in incorporating ESG factors, especially in furtherance of policy or other non-financial goals (e.g., impact investing), with respect to both the (1) management of plan assets and (2) selection and monitoring of plan investment options available under individual account plans, as the case may be. Here are the initial key takeaways:

  • Integration: ESG strategies, such as integration, that incorporates one or more E, S and/or G factors because of materiality to investment performance, would still be considered consistent with ERISA’s fiduciary duties, provided: (a) there is documentation as to the basis for the materiality determination; (b) other “qualified investment professionals” (i.e., an objective standard) would similarly conclude that the ESG factor is material to investment performance based on “generally accepted investment theories”; (c) the weight given to the ESG factor in the materiality analysis is appropriate (a point the DOL stressed in FAB 2018-01); and (d) the ESG investment is measured against “other available alternative investments” with respect to diversification, liquidity and potential risk-return of the plan portfolio. Point (d) is perhaps the biggest deal because it is arguably de facto the tie-breaker test, which the DOL historically used only when the ESG factor was not material to investment performance, and will raise compliance risk for ERISA fiduciaries (investment managers may be able to mitigate this risk through representations from the appointing fiduciary). The DOL noted in the preamble that this requirement was intended to clarify “that an investment or investment course of action must be compared to available alternatives [and] is an important reminder that fiduciaries must not let non-pecuniary considerations draw them away from an alternative option that would provide better financial results.”
  • Other types of ESG investment strategies: The DOL technically allows an ERISA fiduciary to select an ESG investment, in whole or part, for non-financial/pecuniary reasons, which is in keeping with their long-standing guidance. However, the DOL tightens the screws by requiring that the investments be pursued only if they are “economically indistinguishable” from non-ESG investments, and the fiduciary documents such basis “based on the purposes of the plan, diversification of investments, and interests of plan participants and beneficiaries in receiving benefits from the plan.” There are two immediate considerations: (a) how does “economically indistinguishable” standard differ from the tie-breaker test that the DOL historically used in these contexts? and (b) can these conditions ever be met if the investment is pursued partly for non-pecuniary reasons but, as the DOL acknowledges (referencing Dudenhoeffer), the interests of participants and beneficiaries are in pecuniary benefits? In terms of the former, the DOL’s intent is that there is no difference; in terms of the latter, the DOL acknowledges that this standard would only be met in exceedingly rare circumstances, a position that harkens back to the DOL’s 2008 ESG guidance. Because the DOL believes a fiduciary finding that an ESG investment is economically indistinguishable from a non-ESG investment to be a rare occurrence, it does not believe the aforementioned documentation requirements will be a significant cost to the industry.
  • Individual Account Plans: The plan may offer an ESG investment alternative, including an ESG-themed fund, to participants, subject to these two conditions: (a) “the fiduciary uses (and documents using) only objective risk-return criteria, such as benchmarks, expense ratios, fund size, long-term investment returns, volatility measures, investment manager investment philosophy and experience, and mix of asset types” in selecting and monitoring the fund; and (b) no ESG fund is added as, or as a component of, a QDIA. Consequently, “fiduciaries considering investment alternatives for individual account plans should carefully review the prospectus or other investment disclosures for statements regarding ESG investment policies and investment approaches.” The first condition would eliminate the possibility of adding an ESG fund to a plan lineup for any reason other than those investment-return related criteria, such as to promote a public policy (e.g., climate change, etc.). Commenters should seek clarification from the DOL as to whether this was their intent. The second condition is plain on its face and is equally significant: any ESG-related QDIA, regardless of whether it’s a themed fund, and irrespective that just one component of the QDIA takes ESG into account, is out, even if the ESG fund is selected for the plan solely on the basis of investment performance materiality. It’s unclear if this exclusion is limited to ESG funds whose objectives include non-pecuniary ESG goals or whether it applies to all types of ESG funds.
  • The DOL cautioned that “fiduciaries should also be skeptical of “ESG rating systems” – or any other rating system that seeks to measure, in whole or in part, the potential of an investment to achieve non-pecuniary goals – as a tool to select designated investment alternatives, or investments more generally.”
  • The proposed rule, if adopted, would take effect 60 days after publication in the Federal Register, though the DOL is open to comment on whether transition relief should be available.
  • ESG funds and products that have short track records, low assets under management, and/or are somewhat more expensive than similar non-ESG funds, will be particularly vulnerable under this proposal.
  • As noted above, there is a 30-day comment period for this proposal.