Testimony Before the Senate Committee on Health, Education, Labor, and Pensions

James R. Copland testified in a hearing titled The Future of Retirement.

Watch the full testimony here.

The subject of today’s hearing—the future of retirement—could not be more pressing. The United States faces a twin retirement challenge: our Social Security system is on an inexorable path toward paying reduced benefits within the next decade or so, absent substantial tax increases that would have a host of deleterious macroeconomic consequences; and a large percentage of American workers have insufficient private savings to withstand those looming Social Security cuts.

Compounding these twin challenges, pension plans governed under the Employee Retirement Income Security Act (“ERISA”) have often been steered away from their strict fiduciary duty to manage their assets “solely in the interest of the participants and beneficiaries,” even though other interests beyond maximizing financial benefits and minimizing costs—including environmental, social, and governance (ESG) goals collateral to actual risk-and return analysis—should not, and under the law may not, be considered by ERISA plan fiduciaries.

With limited exceptions—which do not constitute the strategies employed in the overwhelming majority of current ESG investing—subordinating ordinary financial standards to ESG concerns will lead to reduced returns, either through a lack of diversification or increased costs. Moreover, Manhattan Institute research, and other scholarship, has found an inverse relationship between social-issue shareholder activism and firm value.

Click here to read the full testimony.

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James R. Copland is a senior fellow at the Manhattan Institute and director of Legal Policy.