SOLUTION: Make the default investment sustainable

Sustainability should be the standard

Making the default investment option sustainable is the best way to protect employees from the financial risks of unsustainable investments.

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Retirement plan default options carry sustainability risks

If climate and other sustainability risks are embedded in a fund, retirement plan investors could be exposed to financial risks from unsustainable investments. Investing unsustainably should be a risk that you opt-in to, not opt-out of.

Given the scale of the world’s sustainability challenges, employee investors need to make sustainability the default. Retirement plan default options should, at minimum, exclude fossil fuel companies, deforestation-risk agribusiness, gun manufacturers, and high-risk prison industrial complex companies.

WHY DEFAULTING TO SUSTAINABILITY MATTERS
Unsustainable investments carry financial risk

Just because the default option is the easiest plan to choose does not mean that it is a safe choice. The default option generally commands the majority of the plan assets: new plan participants often have their contributions automatically allocated to the default, and many never switch.

Evidence indicates sustainability-related risk can negatively impact a company’s stock price as well as its reputation. Asset managers have a fiduciary duty to mitigate the financial risks of climate change and other sustainability issues that could impact performance of the companies held in the default fund.

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As You Sow is not an investment adviser as that term is defined under federal and state (California) laws and regulations. As You Sow is a tax-exempt, nonprofit organization dedicated to educating and empowering shareholders to change corporations for the good through the collection, analysis and dissemination of relevant information to the public, free of charge. As You Sow does not provide financial planning, legal or tax advice. Nothing on this website shall constitute or be construed as an offering of financial instruments, or as investment advice or investment recommendations.
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