US Senators Tina Smith and Patty Murray, US Consultant Suzan DelBene, unveil legal guidelines to help sustainable retirement plans
The bicameral law would provide legal certainty for plans that take environmental, social and governance factors (ESG) into account
WASHINGTON, DC [5/20/21]- Today the US Senators Tina Smith (D-Minn.) And Patty Murray (D-Wash.) As well as the US Representative Suzan DelBene (D-WA 1) in the Senate and House of Representatives introduced laws to the elected company pension plans Providing legal certainty Consideration of environmental, social and governance factors (ESG) in your investment decisions or offering of ESG investment options.
Despite the significant demand for sustainable investment options, relatively few company retirement plans, such as Annuity and 401 (k) plans, incorporate sustainable investing principles into their investment decisions or offer employees sustainable investment options. One of the main problems that hinders plans that seek to offer sustainable investment options is an uncertain and regularly changing legal environment. Sustainable investing was further discouraged by a Department of Labor (DOL) rule under former President Trump that put new limits on the way corporate pension plans account for ESG factors.
Sens. Smith, Murray, and Rep. DelBene want Congress, with its financial factors, to provide the legal certainty needed to reverse course and promote sustainable plans in selecting the retirement plan investment law.
“Sustainable investment opportunities are good for retirees and good for our environment – it’s a win-win situation.” said Sen. Smith, a member of the Senate Banking Committee. “We are bringing this legislation because we know there is a growing demand for sustainable investing and because we believe that Congress should act now to ensure the legal certainty needed to ensure that company pension plans are in place Offer these options to workers across the country. ”
“Americans deserve a safe retirement, and investing in ESG is a key component in achieving that goal,” said Congresswoman DelBene. “This bill promises retirees a way not only to achieve that safe retirement, but also a way to live in a world where retirement is worthwhile.”
“Retirement planning is about planning for the future – and you really can’t do that if you can’t take into account the environmental, social and governance factors that shape the future. Allowing this approach is not just common sense, it is a win-win for workers, retirees, investors, businesses, communities, the environment, and more. ” said Senator Murray, chairman of the Senate Committee on Health, Education, Labor and Pensions. “So Senator Smith, Congresswoman DelBene, and I are putting legislation in place to ensure people can invest in a future that is not only more financially secure for their families, but more equitable, diverse, and sustainable for all.”
What supporting organizations say about the bill
“SIFMA believes it is important for financial institutions to be able to consider all factors, including ESG factors, as part of an investment and risk management strategy. ESG factors should continue to be valid considerations for investment decisions – including Standard Qualified Investment Alternatives (QDIAs) and their components – so long as they are assessed in a manner consistent with a prudent process. We strongly believe that the emphasis should be on the caution of the analysis as opposed to the details of the investments. SIFMA commends Chairman Murray and Senator Smith for their commitment to this important issue and looks forward to working with the committee towards its final adoption. ” said SIFMA President and CEO Kenneth E. Bentsen Jr.
“The bill makes it clear that environmental, social and governance (ESG) criteria can be taken into account in ERISA-driven pension plans and will end the political pendulum of regulatory interpretations on this issue at the Ministry of Labor (DOL).” said Lisa Woll, CEO of US SIF: The forum for sustainable and responsible investing.
“ESG risk analysis is an important part of a prudent investment. We support the Law on the Financial Factors When Selecting Pension Plan Investments as it would help to leverage the use of this analysis as part of selecting pension plan investments, which will benefit participants. ” said Aron Szapiro, Head of Policy Research at Morningstar, Inc.
“Retirement plan sponsors and participants deserve the freedom to choose the 401 (k) investments that best meet their needs. This legislation allows the ESG investments to be included in a 401 (k) menu that corresponds to a normal fiduciary process, without artificial and unnecessary obstacles that are inconsistent with ERISA’s core principles. ” said Brian Graff, chairman of the board of the American Retirement Association.
“The CFA Institute is proud to support the Financial Factors in their selection of the Pension Plan Investment Act. The integration of all material factors, including material ESG factors, is an important part of the analysis and investment decision-making process, regardless of investment style, asset class or investment approach. and one that extends to the exercise of shareholder rights and proxy voting. The legislation helps remove the confusion created by one of the Department of Labor regulations (RIN 1210 – AB95) finalized last year and makes it clear that including ESG factors in the financial evaluation and management of planned investments may be compatible with ERISA’s fiduciary obligations. “ said Kurt Schacht, Head of Advocacy, Americas, CFA Institute.
“The Bill’s proposal on Financial Factors When Selecting Pension Plan Investments would require trustees to consider investment returns primarily, but would also allow them to consider ESG factors both as a source of potential investment returns and as a link in deciding between the two to include otherwise equivalent systems. We believe this is an appropriate framework as it allows trustees to incorporate ESG factors into their investment decisions, including those that apply to the Standard Qualifying Investment Alternative (QDIA), while the trustees’ obligation to seek investment returns for the beneficiaries, continues to take precedence. ” said Catherine Reilly, Director of Retirement Solutions at Smart.
You can access a letter of support from State Street Global Advisors here, a summary of the bill here, and text of the bill here.