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Sustainable Retirement Investment Options: Exploring the Climate Impact

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Exploring the climate impact of retirement investment options.

Description: An image of a graph showing the increase in retirement account balances in the fourth quarter of 2020.

,"... there is a lack of awareness about the climate impact of retirement investment options for individuals. For employers, the main..." Spending down retirement savings is a complicated equation to solve. Penn professors that the DP spoke with said that there is a lack of awareness about the climate impact of retirement investment options for individuals. For employers, the main challenge is to find the right balance between providing retirement benefits and managing costs. From there, plan fiduciaries have a range of investment options to choose from that may or may not be sustainable.

Early retirement is becoming more common, and many people intend to leave the workplace at an early age. The choices you make as a young adult might very well decide the amount of money you have to live on in your later years. Therefore, it is important to be aware of the impact that retirement investment options have on the environment.

The Department of Labor (AMEX:DOL) has been working to make it easier for employers to offer sustainable investment options in their retirement plans. In 2020, they issued a rule permitting plan fiduciaries to consider environmental, social, and governance (ESG) factors when making investments. However, some companies are still hesitant to offer sustainable investments due to the additional paperwork and potential legal issues.

Recently, a number of companies have stepped up to provide sustainable-investment offerings in response to demand from clients. These companies offer a range of investment options, from traditional pensions to socially responsible funds. For example, 401(k) Arnie is offering users issue-based investing options that can put their money to work in ways that reflect their values.

The DOL has also proposed changes to the Form 5500, which is the most commonly used report for ERISA-regulated retirement plans. The changes for 2023 include a consolidated Form 5500 option for larger plans and a streamlined report for smaller plans. The changes are intended to make it easier for plan sponsors to comply with ERISA regulations and offer sustainable investment options.

There are also a number of organizations that provide resources and guidance on sustainable investing. These organizations can help plan sponsors understand the legal and regulatory requirements for offering sustainable investments in their retirement plans. They also provide guidance on how to evaluate and select investments that are in line with their values.

Finally, plan sponsors should be aware of the potential legal risks associated with offering sustainable investments. The DOL has recently taken action against a number of companies offering outpatient services for allegedly violating ERISA in charging excessive record-keeping fees and maintaining certain investment options. Therefore, it is important to understand the legal requirements and consult with an attorney if needed.


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