President Biden’s Veto Will Protect U.S. Retirement Savings From Undue Restrictions and Confusion
A congressional challenge to the Department of Labor’s new rule risked reverting back to widely rejected rules from the previous administration
March 20, 2023 /3BL Media/ - Ceres applauds President Joe Biden’s decision to veto a House resolution that would have struck down a new U.S. Department of Labor rule that allows retirement plan fiduciaries to consider all financially relevant factors in investment decisions.
The rule is a return to neutrality under the Employee Retirement Income Security Act (ERISA) and neither specifically promotes nor discourages consideration of factors such as climate change or governance.
The resolution introduced by Representative Andy Barr would have left retirement plans subject to rules established by the previous administration that prohibit retirement fiduciaries from considering certain financial risks and created problematic legal uncertainty for retirement plans. For the more than 140 million Americans whose lifesavings are invested in 401(k)s or other ERISA-governed retirement plans, the DOL’s rule ensures that plan fiduciaries can consider all financially relevant risk-and-return factors when making investment decisions.
“Investors in the U. S. and globally recognize the necessity of considering all financially relevant factors, which include the financial risks posed by climate change,” said Steven M. Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets at Ceres. “The DOL rule reinforces the fiduciary duties of prudence and loyalty by clarifying that plan sponsors can take these significant risks into account.”
When the DOL rule was proposed, nearly 900 separate comments were filed, and more than 22,000 individuals signed petitions. Of those commenters, 97% expressed support for the reversal of the Trump-era rules and the clarification of the use of environmental, social, and governance (ESG) factors in the proposed rule. Commenters emphasized that the rules of the previous administration introduced new and confusing terminology and did not represent the views of the industry. Most asset managers already consider the financial risks of climate change and other sustainability threats in the same way they consider all material risk-return factors.
“To require retirement plan professionals to ignore significant financial risks strips away the market’s freedom to make best investment decisions and endangers the security of the lifesavings of working Americans,” Rothstein added. “With climate-related disasters increasingly result in hundreds of billions of dollars in annual losses in the U.S., retirement savers must be able to trust that their plan fiduciaries can effectively evaluate and safeguard against these concerns.”
“President Biden’s use of the veto today represents the prioritization of America’s workers. This new rule could result in greater retirement savings and protection from climate risks.”
About Ceres
Ceres is a nonprofit organization working with the most influential capital market leaders to solve the world’s greatest sustainability challenges. The Ceres Accelerator for Sustainable Capital Markets is a center of excellence within Ceres that aims to transform the practices and policies that govern capital markets to reduce the worst financial impacts of the climate crisis. It spurs action on climate change as a systemic financial risk—driving the large-scale behavior and systems change needed to achieve a net zero emissions economy through key financial actors including investors, banks, and insurers. The Ceres Accelerator also works with corporate boards of directors on improving governance of climate change and other sustainability issues. For more information, visit: ceres.org and ceres.org/accelerator and follow: @CeresNews.
Media Contact: Helen Booth-Tobin
