ESG Could Mire Already Strained 401(k) Plans

The Department of Labor’s new rule permitting retirement plan fiduciaries to weigh and prioritize Environmental, Social, and Governance (ESG) factors for investment decisions and shareholder rights is being lauded by the Biden administration. But millions of Americans won’t be celebrating this move after risky investment strategies drain their 401(K) savings accounts.

The DOL rule stems from a May 2021 executive order mandating a whole-of-government approach to assess physical risks posed by climate change on critical financial decisions. This consequential rule change will amend the Employee Retirement Income Security Act (ERISA) to “protect life savings and pensions of America’s workers and families from the threats of climate-related financial risk” by reversing the “chilling effects” that were wrought by a 2020 Trump administration rule.


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