1 year 5 months ago
401(k) plan officials that invest in ESG investments are playing a fiduciary "loser's game".
A shareholder advocacy group has filed more corporate resolutions challenging the alignment of 401(k) investment menus with corporate standards regarding sustainability initiatives.
As You Sow,[i] a group that describes itself as the nation’s non-profit leader in shareholder advocacy, and which earlier this year received backing from the SEC in its bid to include a proposal for shareholder vote that, if approved, would have required Amazon (and Comcast to “at reasonable expense and excluding proprietary information, prepare a report reviewing the Company’s retirement plan options with the board’s assessment of how the Company’s current retirement plan options align with its climate action goals.”
Those initiatives came up short (the Amazon proposal received 9.1% of the overall vote, Comcast garnered just 6%).
New Resolutions
According to the organization’s website, similar motions have now been filed at Campbell Soup Co.[i] and Microsoft. The latter notes that, “While our company has made significant efforts to address climate change across its operations, data from Department of Labor filings showing company retirement plan options and invested amounts suggest to investors that Microsoft has failed to address the material risks of climate change in its 401(k) Plan in alignment with the duty to select retirement plan investment options in the best interests of plan participants and beneficiaries.”
However, the Microsoft resolution goes further—noting that “Microsoft uses BlackRock LifePath funds as its 401(k) Plan’s default retirement options, resulting in the vast majority of the $38 billion employee retirement dollars of its 401(k) Plan, as of December 31, 2020, invested in funds that hold companies that create substantial climate risk. A recent scorecard, produced by investor representative As You Sow, shows that the Microsoft 401(k) default option is rated Poor due to significant investments in fossil fuel companies and companies that cause deforestation risk.” Those happen to be the same funds challenged in a series of recent fiduciary breach suits—including those at Microsoft.
“Given the threat that climate change poses to workers’ life savings, Microsoft should demonstrate that it is safeguarding employee financial security over time by mitigating climate change-related financial and economic risks as part of a prudently constructed lineup of funds. Failing to satisfy this basic duty could be a liability for the Company, creating reputational risk and making it more difficult to retain employees increasingly concerned about catastrophic climate impacts.”
Ultimately, and as has been the case with other, similar resolutions, this one says that “shareholders request the board provide a report assessing how the Company’s 401(k) retirement funds manage the growing systemic risk to the economy created by investing retirement plan funds in companies contributing significantly to climate change.”
Microsoft’s annual shareholders meeting will be held virtually on Dec. 13, 2022, at 8:30 a.m. PT. This is shareholder proposal No. 3.
[i] The resolution notes that “Campbell’s 401(k) Plan uses Vanguard funds as its default retirement option, resulting in the vast majority of its $1.9 billion employee retirement dollars, as of Dec. 31, 2020,[2] invested in funds holding companies that create substantial climate risk. A recent scorecard, produced by investor representative As You Sow, shows that the Campbell’s 401(k) default option is rated Poor due to significant investments in fossil fuel companies and companies that cause deforestation risk.[3] Campbell’s does not offer any sustainable investment options inside the Plan, nor does it offer employees a “self-directed” investment option to choose other funds outside of the Plan.”
