Following a bench trial, on January 10, 2025, Judge Reed O’Connor of the US District Court of the Northern District of Texas held that the managers of a company’s 401(k) retirement plans had breached their fiduciary duty by allowing their investment decisions to be impacted by ESG interests. Specifically, the court held that “[w]hile it is permissible to consider ESG risks when done through a strictly financial lens . . . ESG cannot stand on its own. . . . [as] ERISA does not permit a fiduciary to pursue a non-pecuniary interest no matter how noble it might view the aim.” This is the first decision to consider whether ESG-focused investing of a 401(k) plan was in accordance with fiduciary duty principles, and the finding by the court that such actions constituted a breach of fiduciary duty will likely influence both other lawsuits and industry players.
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