Texas court ruling reaffirms the strength and neutrality of U.S. Department of Labor 401k rule

Ceres welcomes a court ruling from the Northern District of Texas in the case of Utah v. Walsh, which upholds a U.S. Department of Labor (DOL) rule that ensures retirement plan fiduciaries, including 401(k) sponsors, can consider all financially relevant factors when making investment decisions.

“We commend the Northern District of Texas court for recognizing the importance of maintaining a level playing field for all financially relevant risk and return factors,” said Steven Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets at Ceres. “The DOL’s rule protects the interests of over 140 million retirement plan beneficiaries by making clear that plan fiduciaries may consider the economic impacts of climate change, societal, and other factors when relevant to their risk-return analysis.” 

The rule, Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, was published in November 2022 and took effect in January 2023. As the mounting impacts of climate change affect investments globally, it is critical for plan advisors and sponsors to be able to address the long-term risks and opportunities in the portfolios of their participants.  

Ceres hosted a webinar in February 2023 with former U.S. Labor Department Secretary Martin J. Walsh and current Assistant Labor Department Secretary Lisa M. Gomez alongside business leaders, in which Gomez emphasized the rule represents a “return to neutrality.” At its core, the rule reinforces a fiduciary’s duties of prudence in assessing relevant financial risks and loyalty to the best interests of plan participants.

Rothstein added, “When retirement professionals are empowered to do their jobs without undue restrictions, the lifesavings of millions of hardworking Americans who participate in a retirement plan are better protected for the long-term.” 

Ceres is a nonprofit organization working with the most influential capital market leaders to solve the world’s greatest sustainability challenges. The Ceres Accelerator for Sustainable Capital Markets is a center of excellence within Ceres that aims to transform the practices and policies that govern capital markets to reduce the worst financial impacts of the climate crisis. It spurs action on climate change as a systemic financial risk—driving the large-scale behavior and systems change needed to achieve a net zero emissions economy through key financial actors including investors, banks, and insurers. The Ceres Accelerator also works with corporate boards of directors on improving governance of climate change and other sustainability issues. For more information, visit ceres.org and ceres.org/accelerator and follow @CeresNews.