Workers’ Savings Safeguarded by New Department of Labor Rule
By Natalia Renta
Today, the Department of Labor (DOL) helped safeguard the savings of millions of workers who participate in private-sector employee benefit plans by finalizing a rule related to the consideration of environmental, social, and governance (ESG) factors.
This rule comes at a time when opponents have turned ESG into a culture war issue. This effort seems to be a thinly-veiled attempt to protect the wealth and power of the fossil fuel industry, even though it means jeopardizing workers’ retirement savings by ignoring real investment risks while driving us into a deeper state of climate emergency and economic and racial inequality. Although proponents may try to argue otherwise, the anti-ESG culture war efforts are at their core anti-worker and pro-fossil fuel industry billionaires; anti-ESG efforts are already harming taxpayers’ wallets.
In the face of opposition, the Biden Administration is not backing down in the fight to protect workers’ savings, the financial system, and the broader economy from ESG risks.
The new DOL rule is about protecting workers and their life savings, and partly comes as a response to Biden’s executive order calling on the government to take action to “protect the life savings and pensions of United States workers and families from the threats of climate-related financial risk.”
“The rule announced today will make workers’ retirement savings and pensions more resilient by removing needless barriers, and ending the chilling effect created by the prior administration on considering environmental, social and governance factors in investments,” said Assistant Secretary for Employee Benefits Security Lisa M. Gomez. “Climate change and other environmental, social and governance factors can be useful for plan investors as they make decisions about how to best grow and protect the retirement savings of America’s workers.”
More specifically, thanks to this rule, workers will be better able to avoid investment risks — like those caused by the effects of union busting, worsening climate impacts, and destructive corporate governance practices (see the latest Twitter developments, for example), and take advantage of investment opportunities — like those presented by robust investments in workforces, the transition to a green economy, and corporate transparency and accountability.
Besides allowing those managing workers’ money to take into account these types of risks and opportunities, the rule makes it easier for workers themselves to choose investments that consider ESG factors as well as investments that provide other non-financial benefits — as long as they do not sacrifice returns. Without ESG options available in 401(k)s, workers are put at a distinct disadvantage — needlessly shut out from the consideration of long-term systemic risks to their retirement security.
The DOL also protects workers’ shareholder rights, including the right to vote proxies. A past Trump-era rule disincentivized fiduciaries from voting workers’ proxies, enhancing the power of big corporations’ management and decreasing the voices of worker shareholders. This rule gives workers more say and power in the companies they are invested in.
While this rule takes an important step toward protecting workers, the DOL should do more to safeguard workers’ retirement funds, including setting minimum standards for management of systemic risks that pose a significant risk to the economy, the financial system, and the long-term economic security of workers. These include racial and economic inequality, climate change, and threats to democracy.
As ESG fights continue to heat up, becoming more political and polarized, it is important to continually ask the question: who is taking action to protect workers and their hard-earned savings and who is taking action to protect the wealth and power of fossil fuel billionaires?