US pension plans should be required to disclose sustainable investment policies, according to the US Impact Investing Alliance.
The alliance has called for mandatory action by the Department of Labor (DoL) in response to a request for input on potential new climate-related rules.
It said providers of 401(k) pension plans should be subject to requirements to address the financial risks and impacts of climate change.
In a letter to the DoL, Fran Seegul, president of the US Impact Investing Alliance, cited research by JUST Capital that showed “overwhelming majorities of Americans support mandatory disclosure by companies about their business practices and their impacts on society”.
“In fact, there has been a steady and significant increase in retail ESG investing and overall interest in ESG over the past several years,” Seegul stated.
The alliance has recommended that the department issue new guidance which requires ERISA-regulated fiduciaries to outline and disclose their sustainable policies.
It also urged the DoL’s Employee Benefits Security Administration to support pension plans in their evaluations of climate-related financial risks and their construction of “prudent sustainable investment policies”.
To do this, the alliance recommended it investigate “the state or landscape of data and analytics available to plan fiduciaries”.
“This could include existing data providers, with a breakdown of how that data is being evaluated and interpreted against industry accepted climate-related metrics, standards or benchmarks,” the letter stated.
Additionally, the DoL was urged to co-ordinate its efforts with other federal agencies, such as the Securities and Exchange Commission, which recently proposed climate-related disclosure rules for listed companies.
Just two years ago, the DoL was considering a rule banning plan fiduciaries from considering non-financial criteria in their investment strategies. However, this was scrapped at the start of the Biden administration.