Proposed Rule Would Bring More Sustainable Investing Options to More Than 100 Million Workers
Department of Labor proposes timely regulation to ensure Employee Retirement Funds protect savings against climate risk and take advantage of ESG fund opportunities
October 13, 2021 /3BL Media/ - Ceres applauds a proposed rule issued today by the U.S. Department of Labor that would open the way for the sponsors of retirement funds to include more sustainable options in their retirement saving plans. Today’s proposed rule, Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, reverses the prior administration’s misguided restrictions on 401(k) and other ERISA plans.
“The proposed rule by the Department of Labor shows the Biden administration’s commitment to protecting the savings of hardworking Americans and ensuring they are not needlessly exposed to the significant financial risks of climate change,” said Steven M. Rothstein, Managing Director of the Ceres Accelerator for Sustainable Capital Markets at the sustainability nonprofit Ceres. “Climate change poses an imminent material financial risk that fiduciaries must consider in selecting retirement investments. Many of the largest and most sophisticated investors around the world have already integrated climate risk into their investment processes. The numbers show that employees want to invest their retirement savings sustainably. This proposed rule, if adopted, will ensure that fiduciaries can incorporate climate risk into their investment decisions when in the best interest of the plan’s beneficiaries.”
ERISA plans include more than $10 trillion in assets, and cover about 141 million workers and beneficiaries, making them the most widely held form of stock market participation for Americans. However, fewer than ten percent of 401(k) plans include climate-friendly options, despite studies showing consistent outperformance of environmental, social and governance (ESG) funds relative to the broad market, with higher average returns and lower risk. For many millennial workers, who are at the beginning of their careers, sustainability is foremost on their minds when investing.
“The Department’s proposed rule is not only good for companies and their employees, but will strengthen our economy,” added Rothstein. “Allowing employees to choose retirement funds that account for climate risk will provide a valuable anchor for the burgeoning green economy. As we continue the shift away from fossil fuels to renewable energy and other low carbon technologies, we are creating new businesses that will strengthen the nation’s competitiveness.”
Ceres looks forward to submitting comments and encourages others to do so between now and December 13, 2021.
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 within Ceres that aims to transform the practices and policies that govern capital markets in order 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. For more information, visit ceres.org and ceres.org/accelerator and follow @CeresNews.
