Alaska and 24 other states filed a complaint last week against a U.S. Department of Labor rule that, starting today, will allow retirement account managers to invest their clients’ money into funds that prioritize or consider environmental and social values, rather than traditional fiduciary standards.
The new rule, allowing the fiduciaries for retirement funds to choose what they may believe is best for the world, rather than best for the client. The “woke” funds are known as ESG, or Environmental, Social ,Governance funds, and investments in these funds may bring smaller returns to the retirement accounts of millions of people. Two-thirds of Americans’ retirement savings are held in accounts that could be converted into “woke” investments without their knowledge.
The rule also runs counter to the Employee Retirement Income Security Act of 1974.
“This rule is contrary to longstanding federal law and fiduciary principles that require fiduciaries to place their clients’ financial interests first,” Gov. Mark Gordon of Wyoming said. “Allowing political agendas to guide managers investing Americans’ retirement accounts is unacceptable and shortsighted. Their sole responsibility must be the best financial interests of the beneficiaries.
The rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” went into effect on Jan. 30, 2023.
“The 2022 Investment Duties Rule makes changes that authorize fiduciaries to consider and promote ‘nonpecuniary benefits’ when making investment decisions. Contrary to Congress’s clear intent, these changes make it easier for fiduciaries to act with mixed motives. They also make it harder for beneficiaries to police such conduct,” the lawsuit reads.
The 25 states participating in the lawsuit, which is led by Wyoming, are: Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, South Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming.
A copy of the complaint may be found here and below:
The average salary in 1975 was ~$14,000.
On January 1, 1975 American citizens were allowed to purchase gold again. The price per ounce was $194.
If the average American spent 1 month’s income ($1,160) to purchase gold and held it to today, that investment would be worth over $12,000.
Try getting a 10x rate of return on 1 month’s worth of income in your 401k.
Money invested in an S&P index fund from 1992 to 2022 would be worth 17x. The market beats gold over the long term.
If you’d purchased an S&P Index fund in 1975 for $1,160 and reinvested all the dividends you’d have more than $220,000. That’s a nominal 19,000% rate of return or an annualized 11.61% rate of return.
A side note in the interest of accuracy, the first index fund (S&P 500) was created in 1976.
The biggest investment frauds use ESG’s as cover for ridiculous investments such as overpriced carbon credits and wind turbine subsidies (Fire Island Wind Farm).
The government is out to have total control of commerce and our life’s. They tell us what we can drive what we can eat what we can live in what stove we have to have. This use to be a free country.
I certainly am not an attorney, and for most matters like this it’s easy to find attorneys on each side of the fence – each very sure of themselves. However, I don’t see how this White House rule could comport with common state law such as the so-called Prudent Investor Rule found in Alaska statutes, and as followed by the Permanent Fund, the Alaska Retirement Management Board, etc. BTW, Many of the ESG financial advisors eschew investing in firearms manufacturers, and I would guess that at lease some would also avoid investments in archery and fishing. Some would also avoid investment in golf equipment manufacturers and in gold courses because of equality and land use concerns, and probably all of them would stay away from bowling and bowling alley investments because of equality issues and because bowling alleys are one of the chief uses of old growth sugar maple lumber. It quickly becomes pretty silly to people who stick with common sense, but apparently not to that old fellow in the White House.
See how they love ya, wokies? They’ll take your money and give it to their budwerds like that not too bright election croney across the drink with his college buddies. Watch out for the wokies. They’re going broke; losing power is next. Say all you minorities in AK due to racial discrimination most won’t be in any retirement plans anyways. Too much being shoved out of the job long before. Alaska has a woke mental illness retirement plan. Etc.
The people need to create their own banking and retirement fund. Screw the big financial institutions. There are more ways to make money other than Wall Street.
If you want to invest in woke companies, go ahead and do so.
However, the managers of retirement investments have a responsibility to seek the best possible return for their clients. If that means investing in the KKK and Nazis, that is what they should be doing.
I am OK with a socially conscious choice for retirement investing, under the condition there is always another option. If you want to support your woke causes, do it with your own money, not my retirement savings. If the members of a 401(k) want an option for ESG funds, great, offer it. But, as a choice, not as an overall investment strategy.
It seems a little hypocritical for Alaska to join this lawsuit, since our own Permanent Fund is entangled with some of the worst ESG investment firms, such as BlackRock.
Thank you, Governor amd Attorney General.
May we request the Permanent Fund be divested of all ESG-driven investments.
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