More bad news about your 401(k)

Presented by Natural Allies for a Clean Energy Future:

Sep 29, 2022 View in browser   By Jordan Wolman Presented by Natural Allies for a Clean Energy Future THE BIG PICTURE Granted, you might have more immediate problems with your 401(k) right now, but consider this: It's also a source of significant greenhouse gas emissions, according to a new study. Americans participating in company-sponsored retirement plans are disproportionately investing in and are financially exposed to carbon-intensive companies, according to a new report from the CFA Institute, a nonprofit that certifies financial analysts and conducts policy research. Retirement plans are a more newly examined aspect of financed emissions, which seeks to measure how much a fund or loan from a bank invests in activities contributing to the warming of the planet. The CFA found that the average carbon intensity of a 401(k) plan is 124 times that of the average company's scope 1 and 2 emissions, or 64 tons of CO2 per $1 million invested. For less-carbon-intensive industries, like health care and media, scope 1 and 2 emissions amounted to a tiny fraction — just 3 to 5 percent of emissions compared with their 401(k) plans. While plenty of attention has been focused on the need for companies to consider the potential for losses due to climate and energy transition risks, retirement savers may need to be on the lookout as well. Company retirement accounts are in a "no-person land," said Andres Vinelli, chief economist for the CFA Institute, "in the sense that even if you want to, in many cases, do the right thing, whatever that means for you with your money, the employer controls the menu that you have to eat from." The findings were based on a random sampling of 38 retirement plans from S&P 500 index companies and carbon metrics obtained from MSCI. How retirement plans are impacted by climate risk could prove significant moving forward. Total retirement assets totaled more than $37 trillion as of earlier this year, and material risks and opportunities posed by climate change could impact future retirees' bottom line. This is especially true for 401(k) plans because the investment risk is borne by the employee as an investor, not the company that chooses the plans and financial products.   A message from Natural Allies for a Clean Energy Future: The U.S. is taking aim at reaching ambitious climate targets to aggressively shoot down CO2 emissions and reach a clean energy future. Ready for some good climate news? With the partnership of renewables and natural gas, we've already seen major drops in emissions. Reliable and affordable natural gas supports renewables – accelerating the flight into our clean energy future. And that hits the right mark. Learn more at www.naturalalliesforcleanenergy.org.   Why does all this matter? The financial system needs to shift trillions of dollars into green, sustainable and energy-transition investments in the global effort to combat climate change. Failure to do so may not just impact the health of the planet, but also the financial solvency of a company and its workers. The CFA Institute report comes as U.S. regulators try to catch up with the risks. The Department of Labor has proposed rules meant to protect plan participants against climate-related financial risk, while the Securities and Exchange Commission is advancing proposals to boost climate risk disclosure and guard against greenwashing in ESG-labeled funds. Retirement plans are considered part of a company's scope 3, or indirect, emissions, but since they aren't counted on the balance sheet, they have historically been excluded from greenhouse gas reporting. CFA recommends that companies understand the risks associated with their retirement plans – and ensure participants are "adequately compensated" for those risks. The California Public Employees Retirement System, for instance, found 20 percent of its holdings were exposed to climate-related financial risk. The report also recommends companies consider ESG-focused funds and to improve measurement of financed emissions from retirement plans to better understand the company's carbon footprint.   A message from Natural Allies for a Clean Energy Future:   YOU TELL US GAME ON — Welcome to the Long Game, where we tell you about the latest on efforts to shape our future. We deliver data-driven storytelling, compelling interviews with industry and political leaders, and news Tuesday through Friday to keep you in the loop on sustainability.   SUBSCRIBE TO POWER SWITCH: The energy landscape is profoundly transforming. Power Switch is a daily newsletter that unlocks the most important stories driving the energy sector and the political forces shaping critical decisions about your energy future, from production to storage, distribution to consumption. Don't miss out on Power Switch, your guide to the politics of energy transformation in America and around the world. SUBSCRIBE TODAY.     Team Sustainability is editor Greg Mott, deputy editor Debra Kahn and reporter Jordan Wolman. Reach us all at gmott@politico.com, dkahn@politico.com, and jwolman@politico.com. Want more? Don't we all. Sign up for the Long Game. Four days a week and still free!   A message from Natural Allies for a Clean Energy Future: The U.S. is taking aim at reaching ambitious climate targets to aggressively shoot down CO2 emissions and reach a clean energy future. Ready for some good climate news? With the partnership between renewables and natural gas, we've already seen major drops in emissions. Reliable and affordable natural gas supports renewables – accelerating the flight into our clean energy future. Academics and researchers agree that with the world's greatest interstate energy highway already in existence, and the ability to transport zero-carbon fuels of the future like clean hydrogen, natural gas and its infrastructure has the potential to support carbon reduction and help us reach our climate goals faster. And that hits the right mark. Learn more at www.naturalalliesforcleanenergy.org   WHAT WE'RE CLICKING — Hurricanes might be on your mind. Check out the proposed Ike Dike project off the Texas coast, per the Houston Chronicle. — Would you hitch a ride in a driverless car? This NYT reporter took it for a spin. — The EPA and Colorado Gov. Jared Polis are in a fight over ozone, the Colorado Sun reports.   LISTEN TO POLITICO'S ENERGY PODCAST: Check out our daily five-minute brief on the latest energy and environmental politics and policy news. Don't miss out on the must-know stories, candid insights, and analysis from POLITICO's energy team. Listen today.       Follow us on Twitter Debra Kahn @debra_kahn Greg Mott @gwmott Jordan Wolman @jordanwolman   Follow us

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