Sec. 2. Findings

402 words·~2 min read·/bill/117/hr/3604/ih/section-2

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

The Congress finds the following: There is now incontrovertible evidence that environmental, social, and governance (hereinafter in this Act referred to as ESG ) factors can have material and substantial effects on investment performance. The United States Department of Labor which is responsible for administering and enforcing the Employee Retirement Security Act of 1974 has historically recognized that retirement plans may make economically targeted investments ( ETIs ), that is, investments that offer the potential for economic benefits, such as local job creation, community economic development, and affordable and workforce housing construction, in addition to investment returns, provided such investments otherwise comply with ERISA’s fiduciary requirements.

ESG and ETI-related factors are referred to in this Act as sustainability considerations and investments guided by sustainability considerations are referred to as sustainable investments. Sustainable investments have the potential to contribute to the long-term well-being and resilience of individuals and communities in this nation and around the world while earning investment returns comparable to or better than investments with similar risk that do not take these factors into account.

Sustainable investing is now among the fastest growing segments of the investment industry with broad and growing interest from both individual investors and institutional asset managers. Nevertheless, sustainable investments are virtually absent from ERISA-regulated retirement plans in the United States. Retirement plans and participants in individual account retirement plans should have the opportunity to make and hold sustainable investments, provided ERISA’s fiduciary requirements are otherwise met.

Accordingly, fiduciaries for retirement plans should— incorporate all relevant factors, including sustainability-related factors, into investment analysis and decision-making processes, consistent with the investment time horizons of plan participants and beneficiaries; be permitted to consider factors relevant to sustainability, whether or not they can be demonstrated to be financially material, provided doing so does not diminish anticipated investment returns or increase investment risk and is otherwise consistent with ERISA’s fiduciary requirements; encourage the adoption of best practices for sustainability performance and sustainability impacts in the companies or other entities in which they invest; consider plan participants’ and beneficiaries’ sustainability-related interests and preferences when making investment decisions; consider the impact of plan investments on the stability and resilience of the financial system and on broad market returns as a result of the sustainability characteristics of those investments; consider participation in shareholder engagement and proxy activities, policy advocacy and similar actions based on sustainability considerations; and disclose how they have implemented these commitments.