Letter to DOL on the Request for Information on Possible Agency Actions

Office of Regulations and Interpretations
Employee Benefits Security Administration
U.S. Department of Labor
200 Constitution Avenue, NW
Washington, DC 20210

Ladies and Gentlemen:

The American Bankers Association (ABA) appreciates the opportunity to provide comments to the Department of Labor (Department) on its Request for Information on Possible Agency Actions to Protect Life Savings and Pensions from Threats of Climate-Related Financial Risk (RFI). The purpose of the RFI is to solicit public input on actions that can be taken by the Department under the Employee Retirement Income Savings Act of 1974 (ERISA) and any other relevant laws to safeguard the retirement assets of the nation’s workers and families “from the threat that climate change poses to their life savings.” The RFI includes a series of questions, asking among other things (i) how the Department should address and implement climate-related financial risk, (ii) whether and how data should be collected on climate-related financial risk for employee benefit plans, and (iii) whether ERISA plan administrators, which include our member banks acting as fiduciaries, should be required to publicly report on the steps taken to manage climate-related financial risk, and the results and outcomes of any such steps taken.

We believe that it is not necessary for the Department to take any regulatory action related to climate-related financial risk or other risks associated with climate change. ERISA’s requirements on investment decision-making and risk management processes (specifically, a plan fiduciary’s duty and obligation to identify and address all relevant risks, including climate-related financial risk) afford all the protections necessary to safeguard, preserve, and grow retirement savings. On the other hand, singling out climate-related financial risk for mandatory consideration and reporting, regardless of the actual presence or degree of its risk, (i) undercuts a plan fiduciary’s authority and duty under ERISA to appropriately consider and manage all relevant risks, (ii) imposes unnecessary costs to plans and their participants, and (iii) undermines ERISA standards and Department regulations on investment duties that require deference to the judgment of the plan fiduciary rather than the substitution of the Department’s judgment.

Assuming the Department can overcome these legal obstacles and reasonably conclude that action is warranted, we recommend that prior to taking any such action, the Department (i) collect, analyze, and evaluate the data necessary to understand climate-related financial risk and how this risk interacts specifically with traditional financial risks and ERISA’s requirements, and (ii) consult and coordinate with staffs at the Securities and Exchange Commission (SEC), the Board of Governors of the Federal Reserve System (Federal Reserve), the Internal Revenue Service (IRS), and other relevant agencies on a joint action plan to achieve harmonized regulation of climate-related financial risk that is targeted, consistent, and purposeful. We recommend also that, after such action is completed, that the Department (i) issue an Advance Notice of Proposed Rulemaking (ANPR) to provide full opportunity for public comment and a subsequent public hearing that would assess the need for express regulation of climate-related financial risk, and (ii) after completion of the ANPR process, ensure that any subsequent proposed rulemaking adopt a principles-based, process-driven approach that is flexible and avoids prescriptive rules and requirements. We further encourage and support the Department’s work, individually and together with the other federal agencies, to sponsor and promote public awareness, education, and interaction on climate-related financial risk.

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