- Employers will now be able to invest pension money in green industries
- ESG investing considers the environmental and social impacts of investments
- The change undoes a rule imposed under Trump requiring prioritization of profit
- The new rule, brought about by Biden, will come into effect in 60 days
The Biden administration will allow employers to invest pension money in green industries that could provide lower returns for Americans
The move, which was announced on Tuesday, reverses a rule imposed by Trump in 2020 that forced employers to prioritize profit when making 401(k) investments.
The new rule introduced by US Department of Labor will allow retirement plan investors to focus on ESG investing – which considers the environmental and social impacts of investments.
The change comes as the average 401(k) in the US is down around 25 percent this year, around $34,000, according to data from Fidelity.
Republicans have been opposed to the growing popularity of ESG investing – many argue the concept goes against the main purpose of investing, which is to maximize returns.
Advocates of the change suggest that companies can be more profitable than their competitors when they treat their workers fairly and think about environmental impact.
This loosening of rules was first proposed by President Biden after he ordered government agencies to assess climate-related risk to retirement and pension investments last year.
The change will come into effect in 60 days, the Department of Labor said on Tuesday.
