May 25, 2022 - Douglas Myser

Action may impact your 401 (k). Due to the political agenda of climate change, advocacy groups have started pressing investment funds to invest more in technologies that help, not hinder climate change. Changing the corporate goals of large companies is one way to force change, according to a nonprofit shareholder advocacy group "As you Sow". The group wants to replace low fee index funds with ESG funds, which tend to be actively managed and involve significantly higher fees, but invest more in things that will push the climate agenda forward. Action may impact your 401 (k).

The SEC used to allow companies to exclude this type of proposal from proxy statements, because they relate to the company's ordinary business operations--the wages and benefits provided to employees. The agency simply viewed it as impractical to resolve operational problems at an annual meeting. In this new ear the SEC has adopted a new stance--it does not support the exclusion of any proposal pertaining to "significant social issues". The significant social issue in this case is climate change, and "As you Sow" is going after broad market index funds, which by their very nature include fossil fuel companies in the asset mix. The organization's website focuses particularly on low cost target date funds, which by their very nature include fossil fuel companies in the funds. Vanguard Funds, which are used by 14 of the 16 companies identified as bad actors, received special attention. Although other target date funds, such as those from Black Rock, Fidelity, American Funds, T. Row Price, TIAA-CREF, J.P. Morgan also received failing grades.

If they can have an impact of the value of these funds, by discouraging people from investing in them, and the prices go down, it could have an impact of the value of those with IRS 401 (k) plans invested with these companies. Climate change is going to be paid for, and those that oppose it should be wary of the companies they affiliate with, as they might get hurt in the shuffle.

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