Unshackling Pension Funds for Impact Investing
Earlier today, Secretary of Labor Thomas Perez made a significant announcement that will pave the way for an increase in impact investing worldwide.
In his remarks, Secretary Perez repealed the 2008 guidance that prevented impact investing by pension funds that are governed by ERISA, declaring that “Today, we remove the shackles and return to the sound principles … that fiduciaries may take social impact into account.”
In doing so, the Secretary sent a clear signal that pension funds may consider environmental, social, and governance factors when making investments and explicitly recognized that such factors can be key to maximizing long-term returns for pension fund beneficiaries. In other words, he welcomed pension funds to join the growing movement of doing well by doing good. Even if just a fraction of the trillions in pension funds governed by ERISA are deployed in impact investments, that’s an incredibly significant increase in dollars that are being used to tackle the world’s most pressing problems.
This is the second major move by the Obama Administration to unlock capital for impact investing in a little over a month. It is not a coincidence. It is the reflection of a strong coalition of diverse voices coming together to speak with a unified voice. A wide range of communities—labor and Wall Street, businesses and philanthropies, investors and academics—have joined together to advocate for these important changes. Indeed, both of these recommendations are consistent with the National Advisory Board on Impact Investing’s recommendations issued last year, an organization that Omidyar Network is proud to have co-chaired.
We want to recognize the Department of Labor for this important step forward, and congratulate our colleagues across the industry on reaching this significant milestone. But, in many ways, the real work begins now. The government has done its part in tearing down restrictive barriers, but that is not enough to realize the impact we wish to have in the world. We must now turn to the critical work of bringing awareness to these changes and leveraging these opportunities to increase the dollars at work. By continuing to work together, we can—and will—improve the lives of millions of people worldwide.