Participants in corporate 401(k) plans will be able to compare how their company's sustainability goals play out in plan investments with the Corporate 401(k) Sustainability Scorecard released Tuesday by shareholder advocacy group As You Sow.
The first companies analyzed are Amazon.com and Comcast. As You Sow looked mainly at assets in the Vanguard Target Retirement Funds default options, which accounted for more than 50% of plan assets for both companies, and found a disconnect between the companies' sustainability goals and 401(k) investments.
In Amazon's case, the company "is working to address climate risk in their operations by purchasing 100,000 electric vehicles and powering their data centers with renewables. Given all of that work, it is very strange that Amazon employee's savings are invested in companies literally burning down the Amazon rainforest," said As You Sow CEO Andrew Behar in a news release.
The group's Invest Your Values tools show investors what they own. Next week, it will place ads in Amazon employee social media feeds with a link to the scorecard, and a call to action.
The plan to is to release scorecards for more companies shortly and to cover the S&P 500 over the next year, spokeswoman Stefanie Spear said.
Mr. Behar said in the news release that the point is that "no one knows what investments they own or understands that we are profiting from our own destruction and adding risk to our portfolios. Once people know what they own they will demand change. Our new scorecard shines a bright light on this."
Financial risks from investing in companies that pose environmental or social risk include stranded assets, reputational risk, and unsustainable business practices that can harm shareholder value, the group said in the release, giving companies two options to address the risk of unsustainable investments: consider making the default investment option a sustainable fund, and at least offer sustainable investment options in retirement plans.
Matthew W. Patsky, CEO of Trillium Asset Management said in the same release that with decades of evidence linking ESG characteristics and financial return, "It is irresponsible and a clear violation of fiduciary duty for companies to not provide robust ESG options in their 401(k) plans." He criticized companies, including Amazon, for making the default option "the worst possible outcome for all stakeholders." By investing to match broad market indices, employees unknowingly buy everything, "including companies that almost everyone can agree should be avoided," Mr. Patsky said.
