ABA to DOL: ERISA affords retirement savings sufficient protections from climate-related financial risk

In a comment letter responding to a Department of Labor request for information, the American Bankers Association said it is not necessary for the department to take any regulatory action related to climate-related financial risk or other risks associated with climate change.

Requirements of the Employee Retirement Income Savings Act of 1974 (ERISA) on the investment decision-making and risk management processes “afford all the protections necessary to safeguard, preserve and grow retirement savings,” ABA wrote in today’s letter. On the other hand, a new regulatory scheme requiring considerations and reporting of climate-related financial risk, regardless of the actual presence or degree of such risk, would “undercut a plan fiduciary’s authority and duty under ERISA to appropriately consider and manage all relevant risks; impose unnecessary costs to plans and their participants; and undermine ERISA standards and department regulations on investment duties that require deference to the judgment of the plan fiduciary rather than the substitution of the department’s judgment,” ABA wrote.

If the department can overcome these legal obstacles and reasonably conclude that action is warranted, then ABA recommended that prior to taking action, the department “collect, analyze and evaluate the data necessary to understand climate-related financial risk and how this risk interacts specifically with traditional financial risks and ERISA’s requirements, and consult and coordinate with staffs at the other federal financial agencies on a joint action plan to achieve harmonized regulation of climate-related financial risk that is targeted, consistent, and purposeful.” The letter also responded to specific RFI questions related to the substance and manner of reporting on climate-related financial risk.

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About Author

Christopher Delporte is a senior editor for the ABA Banking Journal and editorial director for member communications at the American Bankers Association.