Published: November 3, 2021
By: Jeff Mordock
A rule quietly proposed by the Biden administration would allow companies to consider factors such as climate change, diversity issues and even political donations when selecting employees’ 401(k) plans, potentially forcing workers to funnel some of their pay into woke causes.
The proposal explicitly directs retirement plan administrators and asset managers to consider environmental, social and corporate governance (ESG) factors when selecting investments.
That would require retirement plan sponsors to give as much weight to a fund’s support of liberal causes, such as donating to Black Lives Matter or building wind turbines, as they do to financial returns.
The Labor Department rule makes clear that “climate change and other ESG factors are often material” and should be considered “in the assessment of risks and returns.”
It also rescinds a Trump-era rule that requires administrators and asset managers to offer investment options solely in the financial interests of participants.
Under the proposed rule, announced late last month, administrators could enroll workers in ESG funds as a default if the employee does not select an investment option. Workers could unknowingly be supporting causes that don’t align with their political views.
If approved, the rule could affect the roughly 150 million workers and $10 trillion in assets covered under the Employee Retirement Income Security Act of 1974, or ERISA.
Critics say the rule would harm Americans’ retirement savings by allowing asset managers to sacrifice financial returns to promote liberal policy objectives.
“This is the latest example of how the political left works,” said Sen. Marco Rubio, Florida Republican. “They want to remake the entire country to comply with the latest woke agenda. And with this rule, the political left’s allies on Wall Street and corporate America will be free to do it with no recourse for the workers and retirees harmed by it.”
Mr. Rubio responded with a bill that would empower shareholders to sue corporations and executives if their business strategies deviate from their duty to maximize investors’ returns.
Democrats said the proposed rule gives workers the freedom to support social causes and that financially beneficial investments can also promote racial justice and combat climate change.
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