Biden overturns Trump rule and tells 401k investors to prioritize green investments over income — despite plans losing an average of $34,000 this year
- Employers will now be able to invest their pension money in green industries
- ESG investing takes into account the environmental and social impacts of investments
- The amendment repeals the Trump-era rule requiring earnings to be prioritized
- The new rule introduced by Biden will take effect within 60 days
The Biden administration would allow employers to invest their pension money in green industries that could provide less income for Americans.
The move, announced Tuesday, reverses a rule Trump put in place in 2020 that forced employers to prioritize profits when investing in 401(k).
A new rule introduced by the US Department of Labor will allow pension plan investors to focus on ESG investing, which takes into account the environmental and social impacts of investments.
The change comes as the average 401(k) in the U.S. has declined by about 25 percent this year, to about $34,000, according to data from Fidelity.
Republicans have opposed the growing popularity of ESG investing—many argue that the concept interferes with the primary purpose of investing, which is to increase returns.
Proponents of the change suggest that companies can be more profitable than their competitors if they treat their workers fairly and think about their environmental impact.
The Biden administration will ease rules to allow employers to invest pension money in green industries that could provide less income for Americans
The amendment repeals a 2020 rule imposed by Trump that limited employers to investment strategies that favor their financial interests.
This easing of regulations was first proposed by President Biden after he ordered government agencies to assess climate-related risk for pensions and retirement investments last year.
The change will take effect within 60 days, the Labor Department said Tuesday.
The Trump administration issued rules in 2020 that would have a “chilling effect” on the take-up of workplace pension plans, even if the ESG fund provides a financial benefit.
USDOL’s Lisa Gomez said climate change would be a useful insight for investors
“Climate change and other environmental, social and governance factors can be beneficial to plan investors as they make decisions about how best to grow and protect the retirement savings of American workers,” said Assistant Secretary for Employee Benefits Security Lisa Gomez.
About 73 percent of more than 200 respondents said they consider growing savings “extremely important” when it comes to retirements, according to an online survey conducted by Sphere, a climate-friendly 401(k) fund.
By comparison, only 17 percent said investing in a better climate future was extremely important, and about 9 percent said it was not at all important.
The change is good news for those involved in ESG investing, which includes large financial institutions and especially BlackRock, which is responsible for the retirement plan assets of about 35 million Americans.
BlackRock and other major asset managers are including ESG investments in a public display of their commitment to sustainability as GOP financiers shun U.S. energy but welcome China-linked firms with open arms.
It is the world’s largest asset manager and has about $10 trillion in assets.
BlackRock CEO Finke argues that investing to prepare for a net zero emissions economy is the best investment decision.
BlackRock CEO Larry Finke argues that investing to prepare for a net zero emissions economy is the best investment decision.
“We focus on sustainability not because we are environmentally friendly, but because we are capitalists and we trust our customers,” he wrote in his annual letter to shareholders.
Earlier in the year, Florida Governor Ron DeSantis labeled ESG a ‘woke equity’ investment. In June, DeSantis proposed legislative changes to prevent public fund managers from considering ESG factors when investing public money.
“We are protecting Floridians from vigilante capital and asserting our constitutional system’s authority over ideological corporate power,” DeSantis said in June.