DOL issues RFI on disclosure and fiduciary issues with respect to “climate-related financial risks”

On February 14, 2022, the Department of Labor published a “Request for Information on Possible Agency Actions to Protect Life Savings and Pensions from Threats of Climate-Related Financial Risk.” Among other things, the RFI solicits comments on whether DOL should collect data on climate-related financial risk (CRFR) for retirement plans, whether certain guaranteed lifetime investment products (e.g., annuities) may mitigate/hedge CRFR and whether DOL should facilitate their inclusion in DC plans, and whether there is a need to educate participants (e.g., in participant directed DC plans) about CRFR.

In this article we briefly review the RFI, together with some observations about possible implications for plan sponsors. We begin with a brief discussion of the background to the RFI.


Section 4 of President Biden’s May 20, 2021, Executive Order 14030 on Climate-Related Financial Risks instructed DOL to (among other things) identify agency actions that can be taken under ERISA “to protect the life savings and pensions of United States workers and families from the threats of climate-related financial risk.” (The Executive order also instructed DOL to consider revising its ESG and proxy voting regulation – in that regard, see our article DOL proposes new ESG and proxy voting regulation – would significantly change rules adopted by the Trump DOL at the end of 2020.)

The Biden Administration also published (on October 15, 2021), a “comprehensive, government-wide strategy to measure, disclose, manage, and mitigate the systemic risks climate change poses to American families, businesses, and the economy in the form of a report entitled ’A Roadmap to Build a Climate-Resilient Economy’ [Roadmap].’’ The Roadmap “includes recommendations to U.S. financial regulators laying out actions to identify and address climate-related risks to the financial system and promote the resilience of the financial system to those risks.”

This RFI is responding to the above quoted part of Section 4 of the Executive Order and the October 15, 2021, Roadmap.


The RFI asks for comments on whether and how DOL should collect data on CRFR. The RFI specifically asks whether Form 5500 should be used for this purpose. And it asks whether plan administrators should be required to “publicly disclose” information with respect the steps they have taken to “manage climate related financial risk and the results and outcomes of any such steps taken, in a form that is more easily accessible to the public [than on Form 5500].”

Observation: Additional reports to DOL, with respect to, e.g., steps taken to address CRFR, will generally just mean more work for plan sponsors. The public reporting of this information (in Form 5500 or otherwise) may, however, focus activists’ and plaintiffs lawyers’ attention on a sponsor retirement plan investment policy, and that may present issues for some sponsors.

Fiduciary issues

DOL is asking (in the RFI) for general information about sources for “metrics and tools … on which to make decisions on climate-related financial risk factors in evaluating the merits of competing investment choices.”

In addition, DOL is asking whether there are “guaranteed lifetime income products (e.g., annuities)” that may “help individuals efficiently mitigate the effects of at least some climate-related financial risk?” Quoting at length:

If so, what mitigation measures do these products take? Would such products constitute a safe and efficient strategy to transfer climate related financial risk from the participant/employee to the insurer/ guarantor? If so, should [DOL] take steps to facilitate the inclusion of these products in ERISA-covered defined contribution plans? If so, what steps should be taken and what products should be considered, and why? Are there climate-focused annuities that plans could offer?

Observations: First, DOL is not (in this RFI) raising the possibility that, e.g., the absence of an explicit CRFR policy in a sponsor fiduciary’s investment policy somehow raises a fiduciary issue (although it might, per the above, require disclosure of that fact).

Second, with respect to the issue of annuities that mitigate CRFR, it is a little hard to parse out what DOL is getting at. It seems to be conflating what on first pass seem to be two unrelated policy initiatives, in favor of consideration of CRFR (on the one hand) and in favor of including annuities in, e.g., target date funds (on the other).

Third, as the questions with respect to mitigation/transfer of CRFR to an insurer reflect, there seems to be an assumption that holding an asset that presents CRFR might be “bad” retirement investment policy (e.g., for an individual retiree), without regard to the compensating rewards or, for that matter, what the cost of hedging out this risk to a carrier (inside an annuity product) might be. All of that may possibly be true, but we probably need to know more about, e.g., how CRFR specifically affects retirement investors (as opposed to investors generally) and what the cost of a “climate-focused annuity” might be.


Finally, the RFI asks whether there is a need for participant education on CRFR, especially in participant directed plans, perhaps provided by DOL. And, should DOL “coordinate with the Securities and Exchange Commission on its efforts to inform and protect investors, especially individual investors such as plan participants, from potentially misleading statements about fund adherence to policies that address climate-related financial risk (often referred to as ‘greenwashing’)?”