DOL Publishes RFI on Climate-Related Financial Risks to Savings

The Department of Labor has announced that it has published a request for information seeking public comment on what actions, if any, it should take under federal law to protect employees’ retirement savings and pensions from risks associated with climate change.

The RFI, published by the DOL’s Employee Benefits Security Administration, follows President Joe Biden’s Executive Order on Climate-Related Financial Risk, which directs the department to identify actions it can take under the Employee Retirement Income Security Act, the Federal Employees’ Retirement System Act of 1986, and other relevant laws to safeguard the life savings and pensions of U.S. workers and families from the threats of climate-related financial risk. Together, ERISA and FERSA provide oversight to more than $13 trillion in assets.

In early 2020, news broke that an environmental scientist in Australia had sued his pension fund for not adequately disclosing or assessing the effect of climate change on its investments. At the time, Maximilian Horster, managing director and head of climate solutions at Institutional Shareholder Services* ESG, said there was a new trend of entities considering offenses against asset owners.

In November of that year, the Retail Employees Superannuation Trust, commonly referred to as Rest, settled the lawsuit, committing to net-zero emissions in its portfolio by 2050. The fund also said it would “enhance its consideration” of such risks when making investments, publicly reveal its holdings and monitor the approach of its external fund managers.

Last June, the Government Accountability Office recommended that the executive director of the Federal Retirement Thrift Investment Board evaluate the Federal Thrift Savings Plan’s investment offerings in light of risks related to climate change. And, in October, EBSA announced a proposed rule that would remove barriers to retirement plan fiduciaries’ ability to consider climate change and other environmental, social and governance factors when they select investments and exercise shareholder rights.

EBSA says the current RFI deals with a broader set of questions than the proposed rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” and is a different initiative. The RFI solicits general input on agency actions that can be taken under ERISA, FERSA and other relevant laws, and poses specific questions related to data collection and fiduciary issues under ERISA, the Federal Thrift Savings Plan under FERSA and other miscellaneous topics.

“The public and stakeholders in general are a valuable source of information for us. They can help us identify and explore actions to take to better protect the hard-earned retirement savings of America’s families,” says Acting Assistant Secretary for Employee Benefits Security Ali Khawar. “We encourage all interested parties to submit comments, and to share their thoughts and ideas.”

The RFI’s comment period will run for 90 days after its publication in the Federal Register and it includes instructions on how to submit comments.

*Editor’s note: Institutional Shareholder Services (ISS) is the owner of ISS Media, which includes PLANSPONSOR, PLANADVISER and CIO.