(Daily360.com) – An interesting lawsuit has been filed in Texas against American Airlines. A senior American Airlines pilot, Air Force Lieutenant Colonel and F-16 jet instructor named Bryan Spence has brought the class action suit. Spence is suing over the company’s environmental, social, governance otherwise known as ESG investment policies. Spence is alleging the company is going out of its way to invest the pension fund with this “woke” agenda, violating their fiduciary responsibilities to the members. The suit filed against the Fort Worth, Texas based airline contends the company is putting leftist “policy goals over the financial health” of more solid profit making investing. The suit points the finger at the company’s 401(k) committee which they allege is violating the Employee Retirement Income Security Act by using methods such as proxy voting and ESG favoritism to “pursue leftist agendas.” Spence contends more than a few ESG selected funds were more expensive and less fruitful than non-ESG alternatives.
ESG has been a hot button issue since its inception in recent years. The basic premise is that the government determines a score for a company based on its overall behavior in relation to social consciousness and environmental policy. Thus, companies with higher ESG ‘scores’ will see favoritism from brokerage firms, mutual funds and robo-advisors. Big trading companies are now offering exchange-traded funds (ETFs) based on ESG scores. An ETF operates in much the same way a mutual fund does but can be purchased or sold on the stock exchange. ESG based ETF’s are structured to gather compliant companies to invest in. A recent US SIF Foundation report showed investors held roughly $17.1 trillion in ESG led investments in 2020.
The Biden administration is playing a big role with these investments as well. In 2020 the Trump administration issued Department of Labor (DOL) guidelines stating fiduciaries look only at “pecuniary” factors for investing. However, in 2022 through executive order Joe Biden changed this and encouraged EGS based investing as a means of protecting American workers and their investments from the “threats of climate-related financial risk.”
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