House Democratic lawmakers introduced legislation Monday to promote sustainable investing by requiring retirement plan fiduciaries and other financial advisers to consider ESG factors in investment decisions and disclose how they use them.
Under the Sustainable Investment Policies Act and the Retirees Sustainable Investment Policies Act, advisers would have to maintain an environmental, social and governance investment policy, inform workers about it and file it with either the SEC or the Department of Labor. The sustainable investment policy bill amends the Investment Advisers Act, while the retirees bill amends federal retirement law, the Employee Retirement Income Security Act.
Sustainable investing factors that must be taken into account could include worker wages and rights, environmental risks, political spending and human rights policies, among others.
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The lead author of the bill, Rep. Andy Levin, D-Mich., said the legislation would give workers a say in how their retirement funds are invested.
“This is workers’ money. The investment process should be transparent to them and in line with workers’ values,” Levin said in a statement. “Fortunately, we are seeing that there is a convergence of sustainability values and diversity priorities in governance with durable performance over time. Companies perform better if they are aimed at where the economy is going, which is towards sustainability and inclusion across all aspects of how we build, how we make things, how we live and how we move about.”
Levin, a member of the House Education and Labor Committee, was joined by Reps. Brendan Boyle, D-Pa. and a member of the House Ways & Means Committee, and Cindy Axne, D-La. and a member of the House Financial Services Committee, in introducing the bill.
The measures are coming out late in the congressional session and have little chance of being approved before it ends. They will have to be re-introduced in the new Congress next year to begin their legislative journeys.
In an interview with InvestmentNews last month, Levin said he is hopeful there will be ESG momentum on Capitol Hill next year. The path could be more difficult if Republicans control the Senate after runoff elections in Georgia early next month.
“We’re playing to win here,” Levin said. “And I really hope that we’ll find partners in the Senate and find partners across the aisle. It will be a new political world in a Biden presidency.”
He said the bills are not a direct response to a recent Department of Labor final rule that critics say would curb ESG investing in retirement plans. The DOL approved a separate rule on Friday that would limit retirement-plan proxy votes to those affecting financial returns.
The concept of the legislation was shaped in part by a white paper — Modernizing the Social Contract with Investment Fiduciaries — recently published by the Center for American Progress, a progressive Washington think tank.
“Investment fiduciaries are essential market participants that have significant and wide-ranging influence over corporate America,” wrote Tyler Gellasch, executive director of the Healthy Markets Association, and Alexandra Thornton, senior director tax policy at the Center for American Progress.
“Their influence is not absolute by any means, but it is more significant than that of almost any other set of actors, short of the government. If they were empowered by regulators to prioritize responsible investment strategies, fiduciaries would be well-positioned to help build a new social contract while respecting — and indeed embracing — their core fiduciary duties to investors and beneficiaries,” the authors said.
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