American Airlines jets at Miami International Airport. Photo: J. Albert Diaz/ALM
On Friday, a federal judge in Texas ruled that American Airlines breached its fiduciary duty, under the Employee Retirement Income Security Act (ERISA), by basing investment decisions for its $26 billion employee retirement plan on environmental, social, corporate governance (ESG), and other non-financial factors and not on the “best financial benefit” of retirement plan participants, in the biggest victory yet questioning ESG investing. U.S. District Judge Reed O’Connor said American Airlines had breached its legal duty to make investment decisions based solely on the financial interests of 401(k) plan beneficiaries by allowing BlackRock, its asset manager and a major shareholder, to focus on ESG factors. The plaintiffs “proved by a preponderance of the evidence” that American acted “with an intent to benefit a party other than plan participants,” Judge O’Connor wrote.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast, American Media and Harris Publications.
