Climate Safe Retirement (USA)
Help your workplace leverage its employee retirement plans to advocate for high-performing, low-cost, climate safe investment options.
Introduction
WorkForClimate is here to support employees at companies of all sizes and sectors to take action to address the climate crisis. This playbook has been developed to support employees in advocating for climate safe employer-sponsored retirement plans, which will have an outsized impact on moving trillions of dollars of capital out of climate destabilizing investments, and protecting your long-term retirement savings.
Currently, employer retirement plans have 2 big problems:
1) They are fueling the climate crisis by investing trillions of dollars in fossil fuels, deforestation, and other high-emitting industries that aren’t actively decarbonizing and
2) This exposure to companies fueling the climate crisis puts your retirement at financial risk.
The transition to a low-carbon future is underway, but we know that it is going to take massive amounts of capital to achieve a net zero future. You can create the demand needed to push the financial institutions we trust to create the options we need to secure our investments and the climate.
Increasingly, companies are making commitments to reduce their climate impact when it comes to emissions throughout their supply chain, from product sourcing, manufacturing, and transportation, to increasing their use of renewable energy, but most have not aligned the investment products in their employer-sponsored retirement plans with a climate safe future.
Many employers may not have considered advocating a climate safe retirement plan for employees, rather they often simply accept the options provided by investment managers. Together we can leverage the power of employer retirement plans to compel investment managers like Vanguard, BlackRock (iShares), and Fidelity to create funds that meet the highest standards of sustainability, while protecting retirement savings. Working together with employers, we are mobilizing employees to push investment managers to create high-performing, low-cost, and accessible climate aligned investment products.
What is a climate safe retirement product?
Working people want climate safe investment options. Not all climate safe investment options are identical but they have common themes that can include:
- Restricting investments in companies extracting fossil fuels and driving deforestation and eliminating companies from the fund that are expanding fossil fuel production
- Ensuring all companies in the fund have a) have credible transition plans which lead to absolute emissions reductions in line with a 1.5°C pathway, b) are actively working on those plans, and c) are on track to hit zero emissions targets by 2050
- Reducing the amount of investments in heavy emitting companies that do not have a viable climate transition plan
- Committing to be engaged stakeholders in the companies that it owns, demanding climate transition plans and committing to vote off directors of companies who aren’t willing to take appropriate action
In addition, investment/portfolio managers should pledge to offer these products across all product types (e.g., target date funds, mutual funds, bonds, exchange traded funds) and to all investors so all customers, including those with workplace-sponsored retirement plans, can build robust climate-aligned portfolios.
Before You Begin - Understanding Employer-Sponsored Retirement Plans
The U.S. retirement market is the largest and fastest growing retirement market in the world, with $32.6 trillion in assets at the end of 2019. Many U.S. companies offer 401(k) plans, where employees can make pre-tax contributions from their paycheck into an investment account that offers a range of investment products (e.g., mutual funds, bonds). Employers may match a percentage of the employee’s contribution. At the end of 2019, U.S. retirement savers had $6.4 trillion invested in 401(k) plans.
Your employer has a retirement plan committee or an HR rep that, together with investment professionals, manages the plan.They select which funds are offered in your plan, including a type of product called a target date fund which invests your money based on your planned year of retirement. While some of the funds in your 401(k) plan might be more sustainable ESG products, far too often, they are not. ESG refers to Environmental, Social, and Governance funds, which, in theory, should not include companies contributing to the climate crisis. However, many ESG funds from Vanguard, BlackRock, and Fidelity still include fossil fuels, forest-risk commodities, and companies that undermine Indigenous and human rights. Even many ESG funds marketed as “sustainable” contain investments in companies fueling the climate crisis.
This means billions of dollars of workers’ hard-earned savings are being invested in companies and sectors that fuel the climate crisis. Not only is this harming our planet and communities, but as we transition to a net zero future, it is increasing the risk that investments in carbon-intensive industries like fossil fuels and deforestation commodities could lose money.
If your employer offers a 401(k) plan or other retirement savings plans, you have the ability to say where you want your money invested – and if your employer does not currently offer climate safe products that protect our planet and your financial future, then you and your colleagues can call for better options.
WorkForClimate is not an investment adviser as that term is defined under federal and state laws and regulations. We are a non-profit organization dedicated to educating and empowering investors to exercise their power as clients and employees to push for safer, more sustainable investment products. WorkForClimate does not provide financial planning, legal, or tax advice. Nothing on this website shall constitute or be construed as an offering of financial instruments, or as investment advice or investment recommendations.
Build a small team:
Why build a team? Building a small team of 2–3 people to work together means that you can:
- Collaborate. A few people will be able to lean on each other for support and divvy up the tasks of research and customizing your proposal as you get ready for a meeting with decision-makers.
- Show power. When you meet with HR or the retirement plan administrator to make your case for a climate safe retirement option, having a small team with you will show them that this is a need that’s echoed by multiple people.
- Have fun! Many people become friends with members of their working group, and rely on it as a source of support and social connection.
How to find 2–3 supporters:
- Talk to the 3 easiest people first. Your closest coworker, your teammates, your manager (if you have the right relationship). The goal of talking with them is to find out what they think about advocating for climate stability via your employer-sponsored retirement plan, and to get a sense of their interest in working with you. Get input by asking and listening.
- Reach out beyond the people you know. If you’re at a big company: is there a sustainability group that meets? Is there a bulletin board where you can post a note and have people contact you? A group that meets at lunch time where you could make a quick announcement?
- Hold an informal meeting. Invite people who you’ve spoken with to gather together for a brief (virtual?) coffee/tea break and ask them to share their hopes for a climate safe retirement plan. Ask them to join you in working towards your goal. Invite them to create a working group with you and don’t leave the first meeting without a set time in the calendar to meet again, perhaps in one week.
Create a working group
Invite people you’ve spoken with so far to work with you to develop a proposal and meet with HR (or other decision-makers). Set a regular time to meet—every week or two—and divide up the work into specific roles. If someone wants to be part of the group but can’t take on much of the work, figure out a way to include them in the process by having them continue to give input or at least be present when you meet with decision-makers.
Who is the decision maker?
Who decides what retirement products your company provides? Power-mapping is a process to figure out who has the power to create change, and who might have the power and incentive to block the initiative.
Maybe it is the HR Director, Chief Sustainability Officer, or another decision maker who oversees retirement plan administration, and there may be key reasons for them to support this change.
Powermap questions to answer:
- Who has the power to make this change?
- Who do they listen to?
- What do they care about?
- What are they most proud of at your company?
- Who is opposed to this change and why?
If you don’t know the answers to these questions, it may be worth having an initial meeting with HR to find out, by asking questions like “have you considered updating our company retirement plan options, who would we talk to about it?”
Once you have a list of key decision makers, you can map them against an axis of:
- (a) Influence over the decision
- (b) Level of support for the goal
It is also helpful to map the key influencers within the organization, and where they sit on the axis relative to the decision makers; getting their support will help you build your case and create the environment for change to occur.
Draw your pathway to success
Once you have a map of the key decision makers, and an understanding of where they sit in relation to making this change, you can start to map a pathway to start influencing change:
Influencing change
As you build your plan and carry it out, you will need to motivate, inspire, and influence people throughout your organisation. In most cases, making this change will require extra work for people, and you may encounter resistance.
Think about:
- Why might someone want to work on this? What’s in it for them? Has anyone been outspoken about climate at your company that you might enlist?
- How is climate change already affecting the company, or how will it in the future? Has your company taken a position on climate? How can you connect achieving this goal with the company’s broader mission and values? Can you write it into the blueprint and connect it back to the origin story and goals?
- Who is going to resist this change and why? Can you understand their objections and fears early so you can mitigate them?
You’ll need to flex this muscle most during approval steps, but you’ll want to be working on it all along the way.
Write the proposal
With your small team or another person, start to customize the template proposal. Your powermap and research should inform how you tailor your message and build your case. Develop a proposal that speaks to your company’s values as well as its fiduciary responsibility to provide employees with a climate safe retirement plan.
For example, if your company has made strong commitments to addressing climate change, focus on how offering a climate safe retirement plan aligns with those values. If your company is proud of its team and loyal employees, highlight employee retention and happiness. You can customize this template to ensure that the language and data in each section match your company’s values and motivations.
What to include
Your proposal should include few key components:
- A strong opening and ask on page one. Busy decision makers want to know immediately on page 1 why you’re meeting and what you’re asking for.
- Why Statement. Outline the financial argument for a climate safe retirement plan, as well as the opportunity for your company to align its climate commitments with its retirement offerings, and/or opportunity to boost morale and employee retention.
- Current Retirement Option. Include your company’s current retirement funds (see section 2 above on how to use Fossil Free Funds), and the concerns you’ve identified, both for healthy communities and a planet, and because it leaves employee’s hard-earned retirement savings exposed to the increasing risks from climate change.
- Outline the solution. Your employer provides a climate safe retirement product as a default option for all employees.
Meet with your company decision maker
Request a meeting to discuss climate safe retirement with HR, the Chief Sustainability Officer, or another key decision-maker overseeing retirement benefits administration who you’ve identified. Whether or not you’ve met with them already, tell them the topic of the meeting ahead of time.
In your meeting with your company’s retirement plan administrator, ask them to better meet the needs of employees, and align with your company’s climate commitments by offering a climate safe 401(k) or 403(b) retirement option as the default for employees. The plan administrator can do this by sending an email to the company’s current retirement fund investment manager requesting a meeting to discuss climate safe options.
Follow-up + Persist!
It is rare to achieve policy change after the first or second meeting. Know that deciding on and incorporating a new climate safe retirement plan may take a few months, depending on the size of your company. This is an exciting time and opportunity for you to work together with your company’s leadership to implement meaningful change for the security of current and future employees’ retirement savings, to align with your company’s values, and to ensure a more sustainable future for us all.
Persistent follow-up and support are often very important to ensuring that your work comes to fruition. Here are a few tips for strong follow-up:
- Confirm with the decision-maker the specific next steps and put them on a calendar. Clarify what further information or research is needed, as well as who is gathering it. Offer to provide resources or help with researching answers to their questions.
- If they aren’t proactively following up with you, then pop into their office or send them a message to ask again “what are the next steps and how can I be of help providing resources or support on this?” Reaffirm your appreciation for their time, commitment to implementing a climate safe retirement plan, and eagerness to work together to make it happen.
- If you get stuck, get in touch with us to troubleshoot any roadblocks and to support your leadership team in talking to their investment manager. Sometimes, even when your company leadership is eager to switch to a climate safe retirement plan, your asset manager may not have the options you need. Expanding your working group to include your organization’s senior leadership and creating a game plan to leverage your corporate brand, values, and sizable amount of money invested with your asset manager will make all the difference in helping you get the climate safe retirement plan you want and deserve. And we are here to help you throughout the process. If an HR person or retirement plan administrator would like to get in touch directly with WorkForClimate to ask detailed questions, please reach out and ask so that we can provide contacts for coaching and support.
Share the impact
Creating climate safe retirement options for employees in your workplace has impact internally and externally, and you can magnify it further through effective communication and advocacy. You will want to work with your PR and Communications team on how best to represent this commitment externally. We suggest making a public statement through a press release or blog post indicating the commitment and timeline. Sharing externally like this reflects positively on your company, and also adds to the groundswell of companies moving their investments out of fossil fuels and into climate safe options, putting pressure on others to follow suit.
