Texas ESG Court Decision

In a recently released decision from the District Court for the Northern District of Texas, the judge decided that a retirement plan sponsored by American Airlines breached their fiduciary duty of loyalty by investing retirement plan dollars with investment managers and funds that pursued investments based on environmental, social and governance (ESG) factors. The court found that the plan allowed corporate interests and the interests of their investment managers to influence the plan’s management. The court, however, found that these actions did not amount to a breach of the plan sponsor’s duty of prudence/

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the Texas court’s finding that a retirement plan’s sponsors violated their duty of loyalty by allowing firms with ESG objectives to manage the plan’s funds.

Below is a summary of the debate that ensued between the two professors.