In this July 27, 2018, file photo, the Dave Johnston coal-fired power plant is silhouetted against the morning sun in Glenrock, Wyo. (AP Photo/J. David Ake, File)
October 9, 2020
Democratic lawmakers are speaking out against a proposed U.S. Department of Labor rule that they argue would make it harder for retirement funds to consider important environmental factors when making investment decisions.
Senators Sherrod Brown and Patty Murray recently joined Congressmembers Bobby Scott and Maxine Waters in submitting a comment letter to the agency that criticizes the changes.
The rule, which was proposed in June, would limit the factors that can inform investment decisions to "financial considerations relevant to the risk-adjusted economic value of a particular investment or investment course of action."
In other words, environmental, social, and corporate governance (ESG) investing would be essentially off the table for retirement funds under the Employee Retirement Income Security Act of 1974 (ERISA), which sets minimum standards for private pension plans.
In the letter, Democrats argue that "the suggestion that environmental and social matters should generally be considered non-pecuniary and left unvoted by ERISA fiduciaries completely misjudges the state-of-play regarding professional investment analysis. Such matters are critical to performing due diligence risk analysis and have become increasingly germane to assessing company strategy and long-term financial viability."
For the growing grassroots movement pushing for fossil fuel divestment, the rule would create additional barriers to convincing major institutional investors, such as state retirement funds, that accounting for the threat of climate change is good for both the planet and their clients.
"It seems contrary to the American system of a market economy for a government agency to selectively direct investor attention away from a specific set of issues," said a letter from Ceres, a sustainability-focused nonprofit based in Boston. "It is also inappropriate and counterproductive to impose new burdens on fiduciaries to determine which shareholder proposals meet the proposed criteria and should be voted on."
For more on the case for and against this rule, read Cheddar's deep-dive here.