Legislation to Protect and Increase Sustainable Retirement Investment
WASHINGTON – This week, Reps. Cindy Axne, D-Iowa, Andy Levin, D-Mich., and Brendan Boyle, D-Pa., sponsored the Sustainable Investment Policy Act and the Retirees Sustainable Investment Policies Act, two pieces of legislation aimed at protecting and increasing sustainable investments.
The two bills together would give workers a bigger say in where they invest their retirement savings by requiring investors and retirement plan fiduciaries to take into account and explain to beneficiaries how they consider environmental, social and corporate governance factors when making investment decisions.
“When we save for retirement, we want to know that our investment is going to be focused where we want it and will be there when we need it,” said Axne. “It’s obvious that companies that invest in their future will do better over the long run, and that’s what sustainable investing is all about. We as investors should understand how our advisers are evaluating these risks, and having this information will help ensure people can control what their savings is supporting.”
Investment experts agree that sustainable investing and profitable investing are not mutually exclusive.
According to Morningstar, a leading research source on investment performance, on average, investments based on environmental, social and governance goals outperformed conventional offerings during 2019 and the first quarter of 2020.
Yet on June 30, the Department of Labor proposed regulations seemingly designed to discourage and block sustainable retirement investing.
The Department received more than 8,000 comments on that proposal, 95% of which opposed the proposed regulations. Those comments came not just from green investors and advocates, but also giants of the investment industry like Vanguard, Fidelity and BlackRock. On October 30th, the Department finalized a version of this rule.
The Sustainable Investment Policies Act amends the Investment Advisers Act, and the Retirees Sustainable Investment Policies Act amends the Employee Retirement Income Security Act, also known as ERISA.
“This is workers’ money. The investment process should be transparent to them and in line with workers’ values,” said Levin. “Fortunately, we are seeing that there is a convergence of sustainability values and durable performance over time. Companies perform better if they are aimed at where the economy is going, which is towards sustainability across all aspects of how we build, how we make things, how we live and how we move about.”
The bills are supported by the Center for American Progress, which released the white paper entitled, “Modernizing the Social Contract With Investment Fiduciaries” in November of 2020, in addition to the United Nations Principles for Responsible Investing and Heartland Capital Strategies.
“This legislation allows Congress to give teeth to what industries, Wall Street and individual investors have made increasingly clear: taking environmental, social and corporate governance principles into consideration isn’t just good public relations, but is the viable, responsible, and profitable approach for America,” said Boyle. “When environmental advocates, corporate leaders and business analysts can all agree that social responsibility cannot coexist without financial responsibility, we need to not just listen to them, but to act to ensure a better future for our economy, our 401(k)s and our environment.”
