ESG products need to be open to pension funds

The Department of Labor has vacillated over the last several decades about how to interpret law that is designed to protect retirees whose nest eggs are managed by large pension funds. Through the powers of the Employee Retirement Income Security Act (ERISA), the DOL makes rules on the types of investments that pensions funds can utilize so that retirees are provided their full benefits in an efficient, cost effective manner. With the rise of investment funds that support environmental, social, and governance corporate practices, the DOL has been slow to adopt the benefits of these funds and allow them as a viable investment strategy for pension fund managers.

Now, the Department of Labor has issued a proposed rule that would make it even harder for pension funds to invest in ESG products. They are calling for a higher administrative burden that would effectively warrant ESG as an unlikely investment options.

At Amalgamated Bank, we think this is wrong and oppose the DOL proposed rule.

We are a bank founded by a labor union and currently managing more than $45B in assets, with the vast majority belonging to Taft-Hartley pension funds and are the largest B-Corp with an explicit commitment to environmental and social justice.  As such, we are uniquely positioned to see the first-hand harmful impact of this decision. As one of the few non-government employers that provide a defined pension benefit, we also have the resources of our current and former employees in mind.

We believe the debate over ESG is settled. We know that investing with social and financial goals hand in hand leads to better financial and societal returns. When investors attempt to ignore the external impact of their investments, it further jeopardizes the very economy we need to generate returns.

Yes, you may have had a 5% return on your oil stocks, but if the workers live in poverty and the land is polluted, are we really better off as a society?

Decades of evidence show that companies that do better for the world are actually better at value creation and providing a return to investors. More than 2,200 studies have looked at this over the years and by 12:1 they show that ESG does better. Simply put, good stewards of people and planet also turn out to be good stewards of their businesses.  As a CEO, I see it every day in the shared values with our employees and the appreciation of our customers, but across industries and sectors the evidence is also clear about the value of ESG for investors.

We all invest for the future. And now more than ever we know that future depends on good stewardship, which is driven by justice, equity, and a sustainable economy that delivers greater financial returns. That is why we oppose the draft DOL rule that would make it harder for working people to invest in an economy that supports other working people. We believe that pension funds should invest in products that uphold the same values that created these resources in the first place: collective bargaining, fair wages, and stewardship of our economy and environment.