An American Airlines pilot who alleges his employer prioritized environmental, social, and governance (ESG) investments over returns has voluntarily dropped two defendants from the lawsuit.
In a court docket recorded on July 19 and July 24, plaintiff Bryan P. Spence dismissed defendants Fidelity Investments and Edelman Financial Engines from the suit, adding that each dismissal “shall be without prejudice, with each side to bear its own costs and fees.”
No reason for the termination was listed, but American Airlines Inc. and American Airlines Employee Benefits Committee are still on the filing as defendants.
The case gained notoriety when it was initially filed in June in the U.S. District Court for the Northern District of Texas. Filing as an individual and as a representative of a class suit, Spence alleges that American Airline’s 401(k) plan underperformed over the course of six years because administrators had chosen investments rooted in ESG, including sustainability efforts, LGBTQ+ interests, and racial and gender diversity. As a result, Spence claims the plan caused him financial harm.
Spence, who is also a military veteran, is accusing American Airlines of breaching its fiduciary duties in violation of the Employee Retirement Income Security Act of 1974 (ERISA) “by investing millions of dollars of American Airlines employees’ retirement savings with investment managers and investment funds that pursue leftist political agendas through environmental, social and governance [‘ESG’] strategies, proxy voting, and shareholder activism—activities which fail to satisfy these fiduciaries’ statutory duties to maximize financial benefits in the sole interest of the Plan participants.”
The case comes at a time of high political contention between Republican and Democrats on sustainable investments, with many of the former linking ESG funds to “leftist ideologies.”
On the participant side, reports have conflicted on whether investors want ESG investments in the plan’s lineup, or if they care at all. An April Gallup study found Americans were largely indifferent with sustainable funds, with 40% claiming they were “not familiar” with ESG, and 59% reporting they had “no opinion” on “the movement to promote the use of environmental, social and governance, or ESG, factors in business and investing.”
Yet, another study from Natixis in April sings a different tune on participant sentiment. In this survey, 73% of participants said they would begin to participate or increase retirement contributions if their employer offered investments in companies with good ESG practices, and 83% believe that sustainable practices could present significant growth opportunities in their investments.
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