July 15, 2020

Senators Warren, Murray, and Smith Urge the Department of Labor to Withdraw Proposal Discouraging Financial Advisors From Supporting Racial Justice

Text of Letter (PDF)

Washington, DC — United States Senator Elizabeth Warren (D-Mass.) joined Senators Patty Murray (D-Wash.), Tina Smith (D-Minn.), and 10 Senate Democrats to send a letter to Department of Labor (DOL) Secretary Eugene Scalia in response to the DOL’s proposed rule that would discourage financial advisors from considering environmental, social, and governance (ESG) criteria. The senators emphasized how ESG investing can be important in considering practices that can impact a company’s performance like their records on racial justice and diversity and how they can serve as tools for long-term change in the fight against problems like racial and economic inequality.

“We are at pivotal moment in the fight against systemic racism in our country. Yet, while people across the country demand accountability and reach for available tools to fight for racial and economic equity—from advocating for sweeping federal reforms to address systemic racism to taking smaller personal steps like supporting Black-owned businesses—the Department is moving in the opposite direction. ESG investing allows retirement savers to support long-term change by building a system that rewards and values inclusion and diversity in corporate culture from the board to the workforce. By restricting ESG investing, the Department’s proposal would undermine a powerful tool that leverages trillions of dollars a year to drive positive social change. According to the Forum for Sustainable and Responsible Investment, in 2018, there were $12 trillion invested in ESG funds – more than a quarter of total investments – and rapid growth is expected in the future,” wrote the lawmakers.

“When deciding whether to invest in companies, we believe plan sponsors and fiduciaries should be able to consider whether or not companies have established diverse leadership teams, whether they foster inclusive or discriminatory workplaces, and whether they engage in a variety of other practices that may impact a company’s performance. ESG-based investing is a key way to grow a plan’s assets in a manner consistent with its corporate principles without sacrificing investment returns. Racial justice, corporate diversity and other ESG factors are increasingly a consideration in investment decisions. Further, contrary to the skepticism and assumptions underlying the Department’s proposed rule, ESG investments often outperform traditional investments and the overall financial markets, including over the past several years, showing investors can both achieve strong returns while driving positive change,” continued the lawmakers. 

Senators Sherrod Brown (D-Ohio), Kirsten Gillibrand (D-N.Y.), Tim Kaine (D-Va.), Bernie Sanders (I-Vt.), Tammy Baldwin (D-Wis.), Bob Casey (D-Penn.), Dick Durbin (D-Ill.), Amy Klobuchar (D-Minn.), Cory Booker (D-N.J.) and Dianne Feinstein (D-Calif.) also signed the letter. 

In a Wall Street Journal letter to the editor this month, Senator Warren called for strong ESG standards and risk disclosures: “Apparently Mr. Scalia wants to keep investors from considering ESG. But climate change threatens the stability of our economy, and ESG investing helps protect against those threats—hardly a fiduciary’s ‘personal preference.’”