Retirees Sustainable Investment Opportunities Act of 2021

I 117TH CONGRESS 1ST SESSION H. R. 3604 To amend the Employee Retirement Income Security Act of 1974 to enable consideration and disclosure by retirement plans of Sustainable Invest- ment Policies. IN THE HOUSE OF REPRESENTATIVES MAY 28, 2021 Mr. LEVIN of Michigan (for himself, Mrs. AXNE, Mr. BRENDAN F. BOYLE of Pennsylvania, and Mr. GARCI´A of Illinois) introduced the following bill; which was referred to the Committee on Education and Labor A BILL To amend the Employee Retirement Income Security Act of 1974 to enable consideration and disclosure by retire- ment plans of Sustainable Investment Policies. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Retirees Sustainable 4 Investment Opportunities Act of 2021’’. 5 SEC. 2. FINDINGS. 6 The Congress finds the following: 7 (1) There is now incontrovertible evidence that 8 environmental, social, and governance (hereinafter in 9 VerDate Sep 11 2014 00:30 Jul 20, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3604.IH H3604 pbinns on DSKJLVW7X2PROD with BILLS 2 •HR 3604 IH this Act referred to as ‘‘ESG’’) factors can have ma- 1 terial and substantial effects on investment perform- 2 ance. 3 (2) The United States Department of Labor 4 which is responsible for administering and enforcing 5 the Employee Retirement Security Act of 1974 has 6 historically recognized that retirement plans may 7 make economically targeted investments (‘‘ETIs’’), 8 that is, investments that offer the potential for eco- 9 nomic benefits, such as local job creation, commu- 10 nity economic development, and affordable and 11 workforce housing construction, in addition to in- 12 vestment returns, provided such investments other- 13 wise comply with ERISA’s fiduciary requirements. 14 (3) ESG and ETI-related factors are referred 15 to in this Act as ‘‘sustainability considerations’’ and 16 investments guided by sustainability considerations 17 are referred to as ‘‘sustainable investments.’’ Sus- 18 tainable investments have the potential to contribute 19 to the long-term well-being and resilience of individ- 20 uals and communities in this nation and around the 21 world while earning investment returns comparable 22 to or better than investments with similar risk that 23 do not take these factors into account. 24 VerDate Sep 11 2014 00:30 Jul 20, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3604.IH H3604 pbinns on DSKJLVW7X2PROD with BILLS 3 •HR 3604 IH (4) Sustainable investing is now among the 1 fastest growing segments of the investment industry 2 with broad and growing interest from both indi- 3 vidual investors and institutional asset managers. 4 Nevertheless, sustainable investments are virtually 5 absent from ERISA-regulated retirement plans in 6 the United States. 7 (5) Retirement plans and participants in indi- 8 vidual account retirement plans should have the op- 9 portunity to make and hold sustainable investments, 10 provided ERISA’s fiduciary requirements are other- 11 wise met. 12 (6) Accordingly, fiduciaries for retirement plans 13 should— 14 (A) incorporate all relevant factors, includ- 15 ing sustainability-related factors, into invest- 16 ment analysis and decision-making processes, 17 consistent with the investment time horizons of 18 plan participants and beneficiaries; 19 (B) be permitted to consider factors rel- 20 evant to sustainability, whether or not they can 21 be demonstrated to be financially material, pro- 22 vided doing so does not diminish anticipated in- 23 vestment returns or increase investment risk 24 VerDate Sep 11 2014 00:30 Jul 20, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3604.IH H3604 pbinns on DSKJLVW7X2PROD with BILLS 4 •HR 3604 IH and is otherwise consistent with ERISA’s fidu- 1 ciary requirements; 2 (C) encourage the adoption of best prac- 3 tices for sustainability performance and sustain- 4 ability impacts in the companies or other enti- 5 ties in which they invest; 6 (D) consider plan participants’ and bene- 7 ficiaries’ sustainability-related interests and 8 preferences when making investment decisions; 9 (E) consider the impact of plan invest- 10 ments on the stability and resilience of the fi- 11 nancial system and on broad market returns as 12 a result of the sustainability characteristics of 13 those investments; 14 (F) consider participation in shareholder 15 engagement and proxy activities, policy advo- 16 cacy and similar actions based on sustainability 17 considerations; and 18 (G) disclose how they have implemented 19 these commitments. 20 SEC. 3. PURPOSE. 21 The purpose of this Act is to enable retirement and 22 welfare benefit plans and participants in individual ac- 23 count retirement plans that are covered by the Employee 24 Retirement Income Security Act of 1974 (29 U.S.C. 1001 25 VerDate Sep 11 2014 00:30 Jul 20, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3604.IH H3604 pbinns on DSKJLVW7X2PROD with BILLS 5 •HR 3604 IH et seq.), to make and hold sustainable investments, con- 1 sistent with the fiduciary standards, requirements, and 2 procedures of said Employee Retirement Income Security 3 Act. 4 SEC. 4. AMENDMENTS TO THE EMPLOYEE RETIREMENT IN- 5 COME SECURITY ACT OF 1974. 6 (a) DISCLOSURE OF SUSTAINABLE INVESTMENT 7 POLICIES.—Section 102 of the Employee Retirement In- 8 come Security Act of 1974 (29 U.S.C. 1022) (‘‘ERISA’’) 9 is amended in subsection (b), by inserting ‘‘a statement 10 of whether or not the plan has adopted a sustainable in- 11 vestment policy pursuant to section 402(b)(5) of ERISA;’’ 12 after ‘‘collective bargaining agreement;’’. 13 (b) ESTABLISHMENT OF SUSTAINABLE INVESTMENT 14 POLICY.—Section 402 of the Employee Retirement In- 15 come Security Act of 1974 (29 U.S.C. 1102) is amend- 16 ed— 17 (1) in subsection (b)— 18 (A) in paragraph (3), by striking ‘‘and’’; 19 (B) in paragraph (4), by striking the pe- 20 riod and insert ‘‘, and’’; and 21 (C) by inserting after paragraph (4) the 22 following: 23 ‘‘(5) adopt a sustainable investment policy of 24 the plan in accordance with subparagraph (d), pro- 25 VerDate Sep 11 2014 00:30 Jul 20, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3604.IH H3604 pbinns on DSKJLVW7X2PROD with BILLS 6 •HR 3604 IH vided a plan may elect not do so if it gives notice 1 to plan participants or beneficiaries in writing of 2 such election’’; and 3 (2) by adding after subsection (c) the following: 4 ‘‘(d)(1) A sustainable investment policy under sub- 5 section (b)(5) shall address sustainability considerations 6 including, without limitation, the following: 7 ‘‘(A) Economically targeted investment consid- 8 erations including, the potential for achieving eco- 9 nomic benefits, such as local job creation, commu- 10 nity economic development, and affordable and 11 workforce housing construction, in addition to in- 12 vestment returns. 13 ‘‘(B) Social considerations including— 14 ‘‘(i) characteristics of workforces employed 15 by entities in which the plan invests, including 16 compensation and benefits, health and safety, 17 diversity and demographics, skills and training, 18 retention and turnover, full-time and part-time 19 employment, and the use of independent con- 20 tractors; 21 ‘‘(ii) labor and human rights compliance by 22 entities in which the plan invests, including 23 workers’ freedom of association, the right to 24 collectively bargain, and the prevention of em- 25 VerDate Sep 11 2014 00:30 Jul 20, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3604.IH H3604 pbinns on DSKJLVW7X2PROD with BILLS 7 •HR 3604 IH ployment discrimination, child labor, and forced 1 labor in company operations and supply chains; 2 ‘‘(iii) due diligence and practices regarding 3 supply chain management, including environ- 4 mental, human rights, and worker compensa- 5 tion considerations; and 6 ‘‘(iv) the implementation, to the extent 7 practicable, of practices which enhance diversity 8 and inclusion within the workforce, senior lead- 9 ership, business procurement, and philanthropy. 10 ‘‘(C) Environmental considerations including— 11 ‘‘(i) the potential to reduce and ultimately 12 eliminate net greenhouse gas emissions associ- 13 ated with business activities and to mitigate ex- 14 posure to climate-related risks to the busi- 15 nesses, assets and properties of entities invested 16 in by the plan; 17 ‘‘(ii) the potential to mitigate other cli- 18 mate-related and associated environmental 19 harms and risks, such as industrial pollution, 20 habitat destruction, deforestation, species 21 endangerment and extinction, and other forms 22 of environmental degradation; 23 ‘‘(iii) the potential to address and rectify 24 issues of environmental justice and the inequi- 25 VerDate Sep 11 2014 00:30 Jul 20, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3604.IH H3604 pbinns on DSKJLVW7X2PROD with BILLS 8 •HR 3604 IH table environmental impacts of certain business 1 operations on historically disadvantaged com- 2 munities; and 3 ‘‘(iv) the potential to provide workers af- 4 fected by the shift to a low carbon economy 5 with a just transition by creating decent work 6 and quality jobs. 7 ‘‘(D) Governance considerations including— 8 ‘‘(i) corporate governance practices by enti- 9 ties in which the plan invests, including execu- 10 tive compensation, board diversity, worker 11 board representation and codetermination, the 12 independence of board chairs, political spending 13 and lobbying disclosure; and 14 ‘‘(ii) tax practices of entities in which the 15 plan invests, including international tax avoid- 16 ance strategies and tax payment disclosure. 17 ‘‘(E) Other relevant economically targeted in- 18 vestment, environmental, social, and governance con- 19 siderations and factors. 20 ‘‘(2) A plan shall be deemed to have adopted a sus- 21 tainable investment policy for the purposes of subsection 22 (b)(5) if it incorporates the sustainability considerations 23 set forth in subsection (d)(1) into a previously adopted 24 investment policy of the plan or if the plan elects to be 25 VerDate Sep 11 2014 00:30 Jul 20, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3604.IH H3604 pbinns on DSKJLVW7X2PROD with BILLS 9 •HR 3604 IH governed by a sustainable investment policy otherwise 1 meeting the requirements of subsection (d)(1) adopted by 2 a third-party fiduciary to the plan. 3 ‘‘(3) A plan that has adopted a sustainable invest- 4 ment policy pursuant to subsection (b)(5), including plans 5 relying on subsection (d)(2), shall conduct a review of such 6 policy on an annual basis.’’. 7 (c) UTILIZATION OF CERTAIN SUSTAINABILITY CON- 8 SIDERATIONS.—Section 404 of the Employee Retirement 9 Income Security Act of 1974 (29 U.S.C. 1104) is amended 10 in subsection 404(a) by adding after subsection (2) the 11 following: 12 ‘‘(3) This subsection 404(a) shall not be con- 13 strued to prohibit a plan fiduciary from doing the 14 following: 15 ‘‘(A) In choosing among investments with 16 comparable degrees of risk and rates of return, 17 selecting one or more such investments based 18 on one or more sustainability considerations as 19 set forth in section 402(d)(1), regardless of 20 whether such considerations are determined to 21 be financially material. For the purposes hereof, 22 the determination that investments have com- 23 parable degrees of risk and anticipated rates of 24 return shall be a determination that a prudent 25 VerDate Sep 11 2014 00:30 Jul 20, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3604.IH H3604 pbinns on DSKJLVW7X2PROD with BILLS 10 •HR 3604 IH man acting in like capacity and familiar with 1 such matters could reasonably be expected to 2 make on a forward-looking basis. 3 ‘‘(B) Incorporating sustainability consider- 4 ations into the monitoring of or decisions re- 5 garding the disposition of plan investments. 6 ‘‘(C) Exercising proxy voting rights in ac- 7 cordance with the plan’s proxy voting guidelines 8 which may include sustainability considerations. 9 ‘‘(D) Considering as financially material to 10 retirement benefits the potential for increased 11 contributions to the plan resulting from a plan 12 investment.’’. 13 (d) INDIVIDUAL ACCOUNT PLANS.—Section 404 of 14 the Employee Retirement Income Security Act of 1974 15 (29 U.S.C. 1104) is amended in subsection 404(c)(1) by 16 adding after subsection (C) the following: 17 ‘‘(D) In selecting investment alternatives 18 for individual accounts, including investment al- 19 ternatives meeting the requirements of section 20 404(c)(5) of this title, a plan fiduciary may in- 21 clude investment alternatives selected in part on 22 the basis of sustainability considerations as set 23 forth in section 402(d)(1) regardless of whether 24 such considerations are determined to be finan- 25 VerDate Sep 11 2014 00:30 Jul 20, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3604.IH H3604 pbinns on DSKJLVW7X2PROD with BILLS 11 •HR 3604 IH cially material, provided any such alternative is 1 determined to have a degree of risk and antici- 2 pated rate of return comparable to other invest- 3 ments of similar type determined by the fidu- 4 ciary to be available and appropriate for inclu- 5 sion in the plan. For the purposes hereof, the 6 determination that investments have com- 7 parable degrees of risk and rates of return shall 8 be a determination that a prudent man acting 9 in like capacity and familiar with such matters 10 could reasonably be expected to make on a for- 11 ward-looking basis.’’. 12 (e) ESTABLISHMENT OF SUSTAINABLE INVESTMENT 13 POLICY TECHNICAL ASSISTANCE PROGRAM.—Not later 14 than 90 days after the date of enactment of this Act, the 15 Assistant Secretary of Labor for Employee Benefits shall 16 establish a technical assistance program to provide edu- 17 cational materials and technical assistance to plans to 18 comply with the amendments made by this Act. 19 Æ VerDate Sep 11 2014 00:30 Jul 20, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6301 E:\BILLS\H3604.IH H3604 pbinns on DSKJLVW7X2PROD with BILLS