The Curious Debate about Retirement During ESG Month

In following ESG month in congress, one thing that stood out to me is how much members of congress talked about the potential impact of ESG investing and proxy voting on retirees. While the desire to protect retirees is laudable, current law already expressly requires fiduciaries to retirement plans to act solely in the interests of retirees and forbids fiduciaries from putting collateral considerations (like advancing ESG goals for the sake of those goals) ahead of those interests. Current law also already expressly requires fiduciaries to conduct a cost benefit analysis when making decisions like how to vote proxies. 

Since the existing framework is already very protective of retirees' financial interests, any new rules like the proposed “Protecting Americans’ Retirement Savings from Politics Act” seem most likely to just create extra confusion, limit retirement plans from accessing good investment options, and impose additional costs on retirement savers. 

We already saw a similar dynamic play out with the Trump administration's DOL ESG rule, which had a chilling effect on the asset management industry and retirement plans, and which resulted in a marked hesitancy to allow retirement focused products to benefit from the type of ESG data that has become common as part of the core investment and risk mitigation process at many asset managers.