Microsoft shareholders voted on an As You Sow resolution asking the company to disclose how the company’s 401(k) retirement funds manage the growing systemic risk created by investing in companies contributing significantly to climate change. The proposal earned an 11.2% vote last week at Microsoft’s annual general meeting, achieving the threshold needed to continue dialog with the company and resubmit the resolution next year, if necessary.
While Microsoft has adopted ambitious climate goals, including a commitment to become carbon negative by 2030 and invest $1 billion in a climate innovation fund, the company’s retirement plan is quietly directing more than $2 billion of employee savings into oil, coal-fired utilities, and agribusinesses involved in deforestation, thus creating cognitive dissonance, reputational risk, and exposing employees’ savings to climate-related financial risk.
Many 401(k) plan fiduciaries have mistakenly avoided taking climate risk into account in their 401(k) plans for fear of breaching their fiduciary duty. However, the Department of Labor (DOL) recently released its long-awaited “Prudence and Loyalty” Rule that empowers plan fiduciaries to safeguard the savings of America’s workers by considering material environmental, social, and governance (ESG) risks when making investment and proxy voting decisions.
A substantial amount of Microsoft’s 401(k) plan assets are held in the BlackRock LifePath Index series funds, which have significant exposure to high-carbon industries that exacerbate the climate crisis and create systemic risk to the economy. A report from the Carbon Disclosure Project indicates that 215 of the largest global companies report almost $1 trillion at risk from climate impacts, with many losses to hit within the next five years. Climate change also threatens workers’ life savings. Despite employee demand for climate-safe investment options, the company does not currently offer any such options inside its 401(k) plan.
Rather than addressing growing employee concern about climate change across its full range of investment options, the company offers a difficult-to-use alternative of a self-directed option, which charges additional fees, and outsources investment risk to employees.