As the US Department of Labor (DOL) continues to contemplate the role of environmental, social, and governance (ESG) considerations in ERISA plan investing, ESG issues surrounding retirement plans are cropping up in another way: as a target for proxy vote proposals that seek to require companies to evaluate their ESG commitments in retirement plans.

A subset of shareholders have recently increased pressure on large companies to align their retirement plan offerings with their climate agendas. Specifically, some stakeholders are pushing companies to allow shareholders to vote on whether a company should include in its annual proxy statement a report analyzing how its retirement plan options align with its stated climate action goals.

SEC Findings

In response to these vote requests, several large companies recently brought these shareholder requests to the US Securities & Exchange Commission (SEC), asking for permission to refuse a shareholder vote on evaluating the companies’ 401(k) plans for environmentally friendly investment options. The request to the SEC was based on the argument that these decisions relate to (1) the company’s ordinary business operations and (2) general employee compensation and benefits, and as such, may be handled without shareholder input.

One company’s request to the SEC highlighted that it already offers an ESG screen investment option as well a brokerage window through which plan participants can choose from a broader array of investments outside of what is included in the investment lineup. The companies’ requests also discussed various fiduciary constraints, referencing federal regulations (i.e., ERISA) that require a fiduciary must make decisions about plan assets “solely in the interest of plan participants and beneficiaries.”

On May 4, 2022, the SEC publicized two denials of such company requests. In its decision, the SEC stated that the stockholders of these companies may include retirement plan evaluation proposals in their upcoming annual shareholder meeting agendas.


These developments are another sign of the increasing focus on the intersection of ESG issues and retirement plans. ERISA and similar standards create unique considerations for retirement plans.

With respect to ERISA plans, though the focus and nomenclature have changed, the DOL has been consistent over the last two decades in affirming that plan fiduciaries must make investment decisions in accordance with ERISA’s two key fiduciary duties of loyalty and prudence. These duties have historically been interpreted by the DOL to require ESG considerations—like climate change goals—to be material to retirement investment savings and not simply an ancillary policy goal.

For that reason, any socially conscious investing efforts, including these types of shareholder actions or other internal and external pressure to pursue ESG goals, must be weighed against ERISA’s requirements (or similar legal requirements for non-ERISA group retirement plans).

Retirement plans may increasingly find they have to balance these legal requirements against pressures such as the shareholder actions described above. Plans and fiduciaries must carefully consider these competing fiduciary requirements in navigating these issues.

For additional analysis on how the DOL is approaching ESG investing, see our October 2021 post, October 2021 LawFlash, and February 2022 post.

If you have any questions or would like more information on the issues discussed in this post, please reach out to the authors or your Morgan Lewis benefits contact.

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The US Department of Labor (DOL) recently announced that it is seeking comment on the impact of climate change on retirement security and what actions, if any, the agency should take to protect retirement savings from such risks.

The DOL put out this recent request for information (RFI), “Request for Information on Possible Agency Actions to Protect Life Savings and Pensions from Threats of Climate-Related Financial Risk,” on February 11. The request follows, and is in addition to, the pending final version of the Environmental, Social, and Governance (ESG) investing regulation titled “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights” (ESG Rule). The proposed version of that rule was released in October 2021, and the comment period closed in December 2021. So, while the DOL works on finalizing the ESG Rule, it is simultaneously searching for additional information about other ways that climate change may impact the retirement industry, and whether the DOL should take additional, broader action on top of the pending ESG Rule.

The DOL’s two primary questions are:

  • How should the Employee Benefits Security Administration (EBSA) act to “protect the lifesavings and pensions of US workers and families from the threats of climate-related financial risk”?
  • What are the most significant climate-related financial risks to retirement savings and why?

In addition, the DOL’s RFI included a list of targeted questions that the DOL seeks input on, including the following:

  • Should EBSA collect data on climate-related financial risk for plans, and if so, with how much precision and how? Some suggestions included (1) using the Form 5500, (2) conducting information requests or surveys on awareness of risks, or (3) requiring plan administrators to publicly report steps they are taking to mitigate risk.
  • What are the best sources of information for plan fiduciaries to use in evaluating climate-related financial risk factors with respect to plan investments?
  • Do any guaranteed lifetime income products help individuals efficiently mitigate the effects of some climate-related risk, and if so, what mitigation measures do these products take, and should EBSA take steps to facilitate the inclusion of these products in ERISA-covered defined contribution plans?
  • Should EBSA sponsor and publish research to improve data and analytics that ERISA plan fiduciaries could use to evaluate climate-related financial risks, and if so, what research subjects should EBSA sponsor?
  • If there a need for participant education about climate-related financial risks? If yes, what role should EBSA play in sponsoring and providing such education, and what efforts should EBSA make to coordinate with the Securities and Exchange Commission to protect investors from greenwashing?

The comment period on this RFI will run for 90 days after the date of publication in the Federal Register (which was February 14). The RFI includes instructions on how to submit comments.

Key Takeaways

  • This action affirms a persistent focus of the DOL on the intersection of ESG and retirement savings. The agency’s focus on climate change’s impact on retirement security is likely to continue even after the agency publishes its final ESG Rule.
  • The DOL may seek to use this information to shape its interpretation of ERISA’s fiduciary duties and the extent to which non-financial factors, such as environmental factors, may be considered as part of an ERISA fiduciary’s investment decisions. This focus is not new. For decades, the DOL (in its capacity as the primary regulator of ERISA’s fiduciary duties) has issued guidance on these topics.

Though the focus and nomenclature has changed, the DOL has been consistent over the many years of regulatory ping-pong in affirming that plan fiduciaries must make investment decisions in accordance with ERISA’s two key fiduciary duties of loyalty and prudence.

However, there are frequently questions regarding how ERISA fiduciaries must navigate this standard. For example, ERISA fiduciaries often struggle to understand whether climate change factors may be considered without violating ERISA’s fiduciary duties or whether, in certain instances, they must be considered.

In light of this confusion, ERISA stakeholders may be interested in responding to the DOL’s RFI and seek to shape the dialogue regarding the intersection of ERISA and environmental considerations.

We stand ready to assist any clients who may wish to provide responses to the DOL’s RFI or who otherwise may seek to anticipate the impacts of the DOL’s focus on ESG and retirement plan investing.