The U.S. Department of Labor’s new rule, Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, “levels the playing field so fiduciaries can consider all financially relevant factors in making investment decisions,” Ceres said in a statement today.
The response from Ceres follows the backdrop of a pending lawsuit in Texas that a coalition of 25 states filed days before the rule went into effect on January 30. The lawsuit aims to halt the rule as part of broad political efforts taking place nationwide to diminish investors’ ability to consider climate change and other sustainability factors in their decision-making.
“The rule was prepared after careful consideration of the extensive and overwhelmingly supportive submissions. Despite efforts from special interests to cast the new rule as political, it merely restores the government’s neutral stance, requiring fiduciaries to use their best professional judgment to make investment decisions,” said Steven M. Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets at Ceres.
Passage of a new House resolution would roll the law back to the problematic rulings from the prior administration, which cast doubt on the financial relevance of climate and other sustainability factors when making investment decisions. “This will significantly increase expense and legal risk for retirement plans and require managers to ignore significant financial risks,” added Rothstein.
There are 140 million-plus participants in 401(k) and other ERISA plans worth nearly $11 trillion. At its core, the DOL rule reinforces the fiduciary responsibilities of prudence in evaluating risks and loyalty to people who entrust those fiduciaries with their money.
“Climate-related disasters are becoming increasingly frequent. With this new rule in play, there is more opportunity to give Americans the options to invest in funds aligned with their values and safeguard their retirement savings from climate risks,” said Rothstein.
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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.