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Biden OVERRIDES Trump rule, telling 401,000 investors to prioritize green investments over profits – despite plans already losing an average of $34,000 this year
- Employers can now invest retirement money in green industries
- ESG investing considers the environmental and social impacts of investments
- The change reverses a rule imposed under Trump that requires profit prioritization
- The new rule, devised by Biden, will take effect in 60 days
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The Biden administration will allow employers to invest retirement money in green industries that can provide Americans with lower returns.
The move announced Tuesday reverses a rule imposed by Trump in 2020 that forced employers to prioritize profit when making 401(k) investments.
The new rule introduced by the U.S. Department of Labor allows retirement plan investors to focus on ESG investments, taking into account the environmental and social impacts of investments.
The change comes as the average 401(k) in the US is down about 25 percent this year, about $34,000, largely driven by inflation.
Republicans have opposed the growing popularity of ESG investing – many argue that the concept goes against the main goal of investing, which is to maximize returns.
Proponents of the change suggest companies can be more profitable than their competitors if they treat their employees fairly and think about environmental impact.
The Biden administration will relax rules to allow employers to invest retirement money in green industries that could provide lower returns for Americans
The change reverses a rule imposed by Trump in 2020 that limited employers to investment strategies that prioritized financial interests
This relaxation of the rules was first proposed by President Biden after last year he instructed government agencies to assess climate-related risks to retirement and pension investments.
The change will take effect in 60 days, the Labor Department said Tuesday.
The Trump administration issued regulations in 2020 that had a “chilling” effect on workplace retirement adoption, even if the ESG fund would have provided a financial benefit, it said.
“Climate change and other environmental, social and governance factors can be helpful to plan investors as they make decisions about how best to grow and protect U.S. workers’ retirement savings,” said Assistant Secretary for Employee Benefits Security Lisa Gomez.
USDOL’s Lisa Gomez said climate change would be a useful consideration for investors
According to an online survey conducted by Sphere, a climate-friendly 401(k) fund, about 73 percent of more than 200 respondents said they considered growing savings an “extremely important” consideration when it came to retirement.
By comparison, only 17 percent said investing in a better climate future was extremely important, and nearly 9 percent said it wasn’t important at all.
The change is good news for those involved in driving ESG investing, including major financial institutions and most notably BlackRock, which is responsible for the retirement funds of approximately 35 million Americans.
BlackRock and other major asset managers have included ESG investments in a public show of their commitment to sustainability, which GOP finance officials say eschews US energy but welcome Chinese affiliates with open arms.
It is the world’s largest asset manager, managing approximately $10 trillion.
Earlier this year, Florida Governor Ron DeSantis called investing in ESG “woke capital.” In June, DeSantis proposed legislative changes to prevent sovereign wealth fund managers from considering ESG factors when investing state money.
“We protect Floridians from awakened capital and assert the authority of our constitutional system over corporate ideological power,” DeSantis said in June.