The Wall Street Journal isn’t fond of the DOL proposed rule that would remove barriers for plan fiduciaries to consider climate change and other environmental, social, and governance factors when selecting investments and exercising shareholder rights.
The WSJ referred to the rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” as a “backdoor rewrite of ERISA, one of the better laws of the last 50 years.”
The editorial, titled “Your New Woke 401(k),” pulled no punches, claiming, “Retirement plan sponsors won’t merely be allowed to prioritize climate and social factors in how they invest. They could be sued if they don’t. Workers won’t get much say because plans won’t be required to ‘solicit preferences’ on ESG.”
“Many compelling studies show the material financial benefits of diverse and inclusive workplaces,” DOL argued in the rule. But the paper noted too many of those studies “confuse correlation with causation” and even the DOL “that findings vary, and theoretical ESG benefits don’t necessarily translate into better financial performance.”
Former Wall Street Journal editor-in-chief Gerard Baker, who now writes its weekly “Free Expression” column told 401(k) Specialist that, “It’s understandable [ESG] looms very large in any investing climate, if you’ll forgive the pun …but one of the many problems with ESG or impact investing is that these are very vague and general terms.”
When managers at companies are focused on shareholder value, Baker explained, their performance can be measured. More general objectives about improving society or raising awareness of social justice issues are not within the firm’s control and are too vague.
“Progressives are moving across the Biden Administration to steer private capital to implement an agenda they can’t pass through Congress,” the editorial concluded. “Your savings will be conscripted to advance the progressive agenda, whether you like it or not.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
It’s an obvious violation of the undivided loyalty principle. This is a push by WH staff to help their former Employeer Blackrock.