Sustainable Investment Legislation Re-Introduced in Congress

Dual bills would require fiduciaries to consider ESG factors in investment decision-making.

A group of Congressional lawmakers has reintroduced two pieces of legislation—The Sustainable Investment Policies Act and the Retirees Sustainable Investment Opportunities Act—that they say will “protect and increase sustainable investments.”

The group of four Democratic members of Congress, led by Michigan Rep. Andy Levin, says the bills would require large asset managers, plan investors, and fiduciaries to take into account environmental, social, and governance (ESG) factors in their investment decisions, and explain to their beneficiaries how they do so. The other supporters include Pennsylvania’s Brendan Boyle, Iowa’s Cindy Axne, and Illinois’ Jesús “Chuy” García.

The Sustainable Investment Policies Act is intended to promote transparency and disclosure by amending the Investment Advisers Act of 1940 by having large asset investment advisors file a sustainable investment policy (SIP) with the SEC. The SIP must describe what factors advisors are considering when they make investment decisions, and they must align with an ESG framework.

The framework includes, among other considerations, corporate political spending and decision-making; worker and collective bargaining rights; climate and other environmental risks; global human rights and diversity and inclusion practices; and the plan’s engagement with companies in which it invests, including proxy voting practices.

Meanwhile, the Retirees Sustainable Investment Opportunities Act is intended to require plans regulated by the Employee Retirement Income Security Act of 1974 (ERISA) to adopt a SIP that explains how investment decisions will address considerations such as job creation, worker pay and benefits, human rights, climate change, and other factors. The bill also says that ERISA plans may invest plan assets in sustainable investments as long as it is in the plan beneficiary’s best financial interest, and does not compromise anticipated risk-adjusted returns. 

“These bills make it easier for Americans to understand if their money is being invested in accordance with their values,” said Levin in a statement. “Fortunately, sustainable investing and profitable investing are not mutually exclusive. Companies perform better if they are aimed at where the economy is going, which is towards sustainability.”

The United Nations-supported Principles for Responsible Investment (PRI) praised the bills, saying that consideration of ESG factors is relevant to the fiduciary duty of prudence because those factors help ensure the long-term sustainability of an investment.

“The incorporation of sustainable investment practices relies on a clear, supportive regulatory environment,” PRI CEO Fiona Reynolds said in a statement. “Both the Sustainable Investment Policies Act and Retirees Sustainable Investment Opportunities Act help create that regulatory support by establishing sustainable investment as part of fiduciary duties.”

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