Erick Russell, the state treasurer of Connecticut, signed a joint letter dated Feb. 19 urging the Securities and Exchange Commission and Department of Labor to resist Republican requests that the federal agencies prohibit money managers and retirement plans from factoring in climate and other broad investing risks.
Russell joined a coalition of 17 financial officers, including state and big city treasurers, comptrollers and auditors, who wrote directly to Mark Uyeda, acting chairman of the SEC, and Vince Micone, secretary of the DOL, entreating them to resist any political pressure.
Russell is principal fiduciary of the $58.8 billion Connecticut Retirement Plans & Trust Funds, Hartford.
The 17 signatories are all Democrats and include James Diossa, Rhode Island State Treasurer and board chair of the $11.5 billion Rhode Island Employees' Retirement System, Providence; and Brad Lander, New York City Comptroller, custodian and trustee of the $279.7 billion New York City Retirement Systems.
The Democratic officials' letter responds to a Jan. 28, 2025 letter from 22 fellow Republican state financial officers, who criticized “activist investment managers and plan administrators” they claim are misusing U.S. retirement plan assets to advance environmental, social, and governance and diversity, equity, and inclusion goals, and are violating of ERISA and securities laws.
The signatories of the Jan. 28 letter were Republicans and include various state treasurers and state auditors.
Competing letters, politics
“Retirement plan fiduciaries must consider long-term financial risks because they are investing over the entire expected lifespans of their plan participants and beneficiaries,” the Democratic officials' letter said.
Unlike short-term investors, who may be focused on quarterly returns, fiduciaries managing pension funds, 401(k)s, and other retirement accounts "must take a multi-decade approach to investment risk. This means evaluating all factors that could materially impact long-term financial performance, including risks related to governance failures, workforce management, regulatory changes, and climate impacts.”
Ignoring such long-term risks, the letter noted, “whether they stem from financial instability, workforce issues, or environmental changes, would itself be a breach of fiduciary duty. It is the responsibility of investment professionals to ensure that portfolios remain resilient across market cycles, economic disruptions, and emerging global risks.”
The letter further said: “The notion that fiduciaries should overlook material risks because they extend beyond immediate financial reporting periods is both shortsighted and contrary to responsible investment management.”
With respect to climate change, which some Republican lawmakers have dismissed as an “unproven and nebulous issue,” the letter countered that “investors, including some of the world’s largest asset managers, routinely evaluate the financial impact of extreme weather events, regulatory shifts in energy policy, and the economic costs of climate-related disruptions.”
Risks associated with climate change, governance failures, and other systemic issues are “not speculative concerns, but present-day financial realities affecting market valuations, insurance costs, supply chains, and infrastructure resilience,” the letter added.
As a result, the federal government, the letter stated, “should not seek to impose the views of a subset of investors who do not believe that long-term financial risks are material to investors onto the rest of the marketplace.”
Moreover, the letter asserted, “any attempt to limit fiduciaries’ discretion undermines investor confidence and financial security” and that “politicizing risk assessment does not protect American retirees; it actively weakens their financial futures by restricting prudent investment management.”
The letter concluded by encouraging the SEC and DOL to “resist efforts to limit fiduciary discretion and impose politically driven constraints on investment decision-making.”
