One hundred million Americans have invested more than $10 trillion in retirement savings that likely are not aligned with their values. Many corporations strive to reduce material risk for all stakeholders by becoming more environmentally and socially responsible. But if they do not consider climate-related financial risks, most invest employees’ hard-earned savings in oil, coal-fired utilities and agribusinesses involved in deforestation, which means employees’ savings fuel climate change.
As You Sow released the Corporate Retirement Plan Sustainability Scorecard to motivate action and shift trillions of dollars away from companies that harm the climate and society and into those working for a just and sustainable world. By using its expertise in mutual fund sustainability analysis and developing an extensive database of ESG-screened companies, As You Sow has rated the 401(k) retirement plans of 42 companies and the analogous 403(b) plans of two universities.
This scorecard shines a bright light on the disconnect between companies’ publicly stated corporate sustainability goals and their retirement plan investments. For instance, Microsoft has pledged to become carbon negative by 2030 and has a $1 billion climate innovation fund. But its employee 401(k) plan participants have more than $2.5 billion invested in fossil fuel companies.
By investing employees’ retirement savings in companies with outsized contributions to climate change, companies are generating in workers’ portfolios climate risk, net-zero transition risk and long-term systemic risk.
In the increasingly competitive employee recruitment and retention landscape, failing to minimize material climate risk in a company’s retirement plan may make it more difficult for companies to attract and retain top talent. Employee polling indicates talented jobseekers look closely at firms’ environmental records when they apply. Employee polling also reveals increasing demand for climate-safe retirement plan options.
To help shift corporate behavior, As You Sow has engaged several companies rated on the scorecard. It has filed shareholder resolutions this year at Amazon.com, Comcast, Campbell Soup, Microsoft and Netflix. The resolutions ask companies to disclose how they protect plan beneficiaries with a longer investment time horizon from climate risk in default corporate retirement plans; they also ask that these plans align with companies’ publicly stated sustainability goals.
Many 401(k) plan fiduciaries rationalize their avoidance of climate risk assessment in their plans by citing the Department of Labor’s (DOL) ERISA rules. However, the DOL recently released its long-awaited “Prudence and Loyalty" Rule that empowers plan fiduciaries to safeguard the savings of America's workers by considering material environmental, social and governance (ESG) risks when making investment and proxy voting decisions.
Most employees across the United States do not know their retirement plan investments profit from environmentally and socially risky companies. These resolutions are helping employees to understand how their retirement saving may be making the planet unlivable. It is time for everyone to become an empowered investor and realize that it is our money and our future.
Grant Bradski
Sustainable Investing Initiative Coordinator, As You Sow