Attorney General Bonta: Fiduciaries of Employee Retirement Plans Should Be Allowed to Consider Climate Change, Other ESG Factors in Investment Decisions

OAKLAND – California Attorney General Rob Bonta today, leading a multistate coalition, urged the U.S. Department of Labor (DOL) to finalize rules clarifying that fiduciaries of private-sector employee retirement plans, such as 401(k) plans, can consider environmental, social, and governance (ESG) factors when making investment decisions. Fiduciaries — including investment managers — are legally mandated to make decisions in the best interest of the people whose money they manage, in this case the millions of employees who put some of their income each month into an employer-sponsored retirement plan. By allowing fiduciaries to consider ESG factors, particularly the costs and impacts of climate change, fiduciaries can make investment decisions that better address the long-term investment horizons of the employees they represent.

“When you put part of your paycheck into a 401(k) or another retirement account, you’re planning for the future. Those making decisions with your money should be able to do the same,” said Attorney General Bonta. “The fact is: The costs of climate change are only going to rise. Whether you’re a major corporation or an individual investor, that's a reality you can't deny. We've urged the SEC to require corporations to disclose their risks to climate change, and now, we're urging DOL to empower those managing everyday Americans' retirement savings to make decisions with those risks in mind.”

For many Californians who work in the private sector, employee benefit plans such as 401(k)s make up the bulk of their retirement savings. Under the Employment Retirement Income Security Act, DOL is responsible for overseeing these plans and sets standards for fiduciaries to ensure they are acting in the best interest of those they represent. DOL's proposed rule would strengthen fiduciaries' ability to meet this responsibility by clarifying that ESG factors often are material factors that should be considered in investment decisions. 

From rising temperatures to more frequent and severe weather events, climate change is already damaging infrastructure, disrupting businesses, and threatening public health in the United States and around the globe. In June, Attorney General Bonta led a coalition in urging the Securities and Exchange Commission to require U.S. companies to provide detailed and accurate information about the financial risk they face from climate change. In today’s comments, Attorney General Bonta and 11 other attorneys general again underscore the need to protect ordinary investors from the financial risks of climate change as its threat to various industries and corporations grows increasingly apparent. 

Attorney General Bonta is joined in filing today's comment by the attorneys general of Connecticut, Delaware, District of Columbia, Maryland, Massachusetts, Minnesota, New Mexico, New York, North Carolina, Oregon, and Vermont.

A copy of the letter can be found here.