Protecting Prudent Investment of Retirement Savings Act

Floor Speech

Mr. Speaker, I rise in opposition to H.R. 2988, the Protecting Prudent Investment of Retirement Savings Act. This bill is premised on the Republicans' mistaken belief that they know best when it comes to investing workers' retirement savings.

Under the present law, the retirement plan fiduciary is required to make prudent investment decisions in the best interests of plan participants and beneficiaries. The bill codifies two rules from the first Trump administration that impose first-of-their-kind restrictions on plan fiduciaries' abilities to consider what are called environmental, social, and governance, or ESG, factors when making investment decisions and exercise shareholder rights.

The appropriate course of action is to permit fiduciaries to consider ESG factors so long as they don't diminish investment returns. As we know, such factors, whether it be sea level rise or poor corporate governance, are relevant to a company's performance. Considering whether a real estate investment will literally be underwater because of sea level rise is not ideology. It is sensible for plan fiduciaries to be permitted to consider such factors and to be able to adopt them if they don't reduce investment returns. That is precisely what the rule from the Biden administration permitted.

Predictably, the Trump administration is walking away from that rule, and now the House is continuing to go in the wrong direction. For example, H.R. 2988 will impose unnecessary barriers to considering things like sea level rise. The supporters are making up some risk, suggesting that some of these funds may be worse than others. I think the studies have shown that they are as good or better, in fact, than others. Meanwhile, the Trump administration appears to be poised to green light what are clearly consensus-held risky investments such as cryptocurrency and put those in retirement plans. That makes no sense at all.

Finally, H.R. 2988 would undermine the worthwhile efforts to increase diversity among asset managers. There are about $82 trillion in financial assets in retirement funds. Only 1.4 percent of those assets are managed by women or minority firms. Women and minorities, represented by two-thirds of the population, they are managing 1.4 percent of the assets.

Now, apparently that creates a problem, and the problem is: How did they get the 1.4 percent? How did the good old boys lose 1.4 percent? So they are going to change the rules to limit access to women- and minority-owned firms. This bill would needlessly undermine what little progress has been made and actually raise questions about what problem we are trying to solve.

We should be trusting our professionals bound by law, not House Republicans to make sound decisions about Americans' retirement savings.

For those reasons, I oppose the bill, and I encourage my colleagues to do the same.

BREAK IN TRANSCRIPT

Mr. SCOTT of Virginia. Kaptur).

Mr. Speaker, I include in the Record links to letters in opposition to H.R. 2988: One led by the Americans for Financial Reform and signed by dozens of organizations representing labor, civil rights, environmental, and other relevant policy issues; another from the AFL- CIO; a letter from SIRES; another letter signed by the National Employment Law Project, the Economic Policy Institute, and the National Partnership for Women and Families; one letter from SEIU; and one letter from the U.S. Sustainable Investment Forum. The link is: https:/ /house.app.box.com/s/xpixugm5qpckl4kxrc4h4u55i3to8roy

Mr. Speaker, right now across the country, workers are struggling to pay their bills and meet basic needs, let alone save for retirement. It is incredibly hard for workers to do much on their own for retirement when, according to the Federal Reserve, many would struggle to come up with the money to finance an unexpected $400 expense, such as a car repair or medical bill.

That being the case, it should not be controversial for retirement plan professionals to appropriately weigh environmental, social, and governance factors in their clients' best interests. H.R. 2988 would restrict the fiduciary's ability to consider all relevant factors that might affect investment decisions to the detriment of retirees.

Of course, it has been pointed out that some ESG funds do better, some do worse, just like all other categories of funds. The committee chair's opening statement suggested that ESG funds don't do as well as the S&P 500. The fact is, most funds don't do as well as the S&P 500 index funds, but the other funds are not restricted. A consideration, not a mandate, of ESG factors ought to be allowed.

They said the present law is not neutral. This law is not neutral because if you want to consider environmental possibilities and concerns or governance or other factors like that, extra paperwork is needed, and it is much more difficult to have those considered.

Mr. Speaker, the professionals ought to be able to decide what are the best investments for the retirees, not politicians. For that reason, I oppose the bill and urge my colleagues to do the same.

BREAK IN TRANSCRIPT

Mr. SCOTT of Virginia. Mr. Chair, I claim the time in opposition to the amendment, and I yield myself such time as I may consume.

BREAK IN TRANSCRIPT

Mr. SCOTT of Virginia. Mr. Speaker, this amendment appears to require GAO to submit a report to Congress that compares the returns generated through the brokerage windows with those of other investments available through retirement plans.

Brokerage windows allow plan participants to invest outside the menu of designated investment alternatives available under their plan. Such investments can include mutual funds and, in some cases, individual stocks and bonds.

Of the amendments that were filed at Rules Committee, my Democratic colleagues and I would have preferred one from the ranking member of the Health, Employment, Labor, and Pensions Subcommittee, Mr. DeSaulnier of California, to be made in order. His amendment would have fixed the fundamental flaw of division A of the bill, which simply would have ensured that plan fiduciaries would be permitted to consider ESG investments if they can be done without sacrificing investment returns.

Although I do not oppose the amendment offered by the gentleman from Michigan, I do have a couple of observations about it.

First, the effect of this amendment could be accomplished by just writing a letter to GAO, along with the chair of the Education and Workforce Committee. That would be faster than sticking it on this bill and hoping the bill passes.

We may draw the conclusion that this amendment was made in order so that the Republican majority could say they have an open process on this flawed bill and avoid yet another criticism of all of their closed rules.

With respect to the substance of the amendment, I am concerned that it needlessly pits two things that are not in conflict, that is, brokerage windows and the plan's designated investments.

My colleagues know, in 2021, the ERISA Advisory Council examined brokerage windows. They noted that fewer than one-third of the retirement plans even offer a brokerage window, and roughly 2 percent of plan participants with access to one actually choose it. When you look at the average brokerage window account, it exceeded over $300,000, which is far greater than what many Americans have in their total retirement funds.

While few people are using the brokerage windows, the ones that do may be interested in exploring funds or stocks that are not affected by their plan. Of those mutual funds that are offered, some may be ESG- themed.

If that is the concern of my colleagues, and if they are banking on the GAO to produce a report that shows ESG-themed funds offered in a brokerage account will underperform, they may be disappointed because researchers at New York University noted that ``empirical studies and meta-analyses consistently demonstrate a positive relationship between ESG integration and financial performance.''

GAO itself has already examined this issue in the past and stated: ``The vast majority, 88 percent, of the scenarios in studies we reviewed . . . reported finding a neutral or positive relationship between the use of ESG information in investment management and financial returns.''

Finally, the gentleman's amendment must be considered alongside the House Republicans' efforts to decimate GAO's budget. Last summer, House Republicans proposed cutting the GAO budget by 50 percent. Fortunately, that was restored in the final version, but it is curious that the House Republicans now want to give the GAO more work after they were so intent on cutting its budget.

Mr. Speaker, I don't know whether it makes much difference whether it passes or not, but I yield back the balance of my time.

BREAK IN TRANSCRIPT

Source