What This Bill Does
This bill changes federal retirement plan rules to let plan managers consider environmental, social and governance factors (issues related to climate, worker treatment, company leadership and similar concerns) when making investment decisions. The bill amends the Employee Retirement Income Security Act of 1974, which is the main federal law that governs retirement plans.
Who It Affects
Fiduciaries (people responsible for managing retirement plan money) and retirement plan participants (workers whose money is invested through these plans).
Key Provisions
• Fiduciaries can consider environmental, social, governance or similar factors when making investment decisions, as long as they follow all other duties required of them (Sec. 2)
• Fiduciaries can use environmental, social, governance or similar factors as tie-breakers when two competing investments are expected to perform equally well in terms of returns and risk (Sec. 2)
• Fiduciaries do not need to provide extra documentation or justification when they use these factors in their decision-making (Sec. 2)
• Investments chosen using these factors can be used as default investments in retirement plans if they otherwise qualify (Sec. 2)
What Changes
Fiduciaries gain explicit permission to consider environmental, social and governance factors during investment decisions without fear of violating their duties to the retirement plan.
II
118TH CONGRESS
1ST SESSION
S. 523
To amend the Employee Retirement Income Security Act of 1974 to permit
retirement plans to consider certain factors in investment decisions.
IN THE SENATE OF THE UNITED STATES
FEBRUARY 16, 2023
Ms. SMITH (for herself, Mrs. MURRAY, Mrs. FEINSTEIN, Mr. BLUMENTHAL,
Mr. DURBIN, Ms. WARREN, Mr. SANDERS, Mr. WYDEN, and Mr. MAR-
KEY) introduced the following bill; which was read twice and referred to
the Committee on Health, Education, Labor, and Pensions
A BILL
To amend the Employee Retirement Income Security Act
of 1974 to permit retirement plans to consider certain
factors in investment decisions.
Be it enacted by the Senate and House of Representa-
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tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE.
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This Act may be cited as the ‘‘Freedom to Invest in
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a Sustainable Future Act’’.
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SEC. 2. ERISA AMENDMENTS.
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Subsection (a) of section 404 of the Employee Retire-
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ment Income Security Act of 1974 (29 U.S.C. 1104) is
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•S 523 IS
amended by adding at the end the following new para-
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graph:
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‘‘(3)(A) Provided that a fiduciary discharges the fidu-
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ciary’s duties with respect to a plan in a manner otherwise
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consistent with this subsection, a fiduciary may—
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‘‘(i) consider environmental, social, governance,
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or similar factors, in connection with carrying out an
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investment decision, strategy, or objective, or other
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fiduciary act; and
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‘‘(ii) consider collateral environmental, social,
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governance, or similar factors as tie-breakers when
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competing investments can reasonably be expected to
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serve the plan’s economic interests equally well with
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respect to expected return and risk over the appro-
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priate time horizon.
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‘‘(B) In a case described in clause (i) or (ii) of sub-
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paragraph (A), a fiduciary shall not be required to main-
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tain any greater documentation, substantiation, or other
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justification of the fiduciary’s actions relating to such fi-
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duciary act than is otherwise required under this part.
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‘‘(C) Nothing in this part shall preclude an invest-
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ment selected in accordance with clause (i) or (ii) of sub-
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paragraph (A) from being treated as a default investment
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or a component of such a default investment (as described
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in regulations issued by the Secretary under subsection
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(c)(5)(A)), if such investment would otherwise qualify for
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such treatment under such regulations.’’.
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Æ
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