A former employee of Cushman & Wakefield, US, Inc. (Cushman), the commercial real estate services company, filed a civil enforcement action against Cushman and the Cushman & Wakefield Investment Committee alleging that the defendants breached their fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA) by selecting and retaining investment options in Cushman’s 401(k) plan “in spite of numerous glaring red flags, including chronic underperformance, dangerous aggregation of climate change-related financial risk, unreasonably high fees, and limited market acceptance.” The plaintiff brought the suit on behalf of participants and beneficiaries in the 401(k) plan whose individual accounts are or were invested in the Plan’s Westwood Quality SmallCap Fund (Westwood Fund) from January 1, 2021 through the date of judgment. The complaint alleged that Cushman, despite being “acutely aware” of climate-related financial risks and having a “long track record” of managing such risks to protect shareholder value and its clients’ portfolios, had “exposed employee retirement savings to significant, unreasonable climate-related financial risk—apparently failing to employ any climate risk management strategy at all.” The complaint alleged that the inclusion of the Westwood Fund as a fund option in the 401(k) plan was a “prime example of this failure.” The complaint alleged that the Westwood Fund “boasts an unsavory combination of financial underperformance and unreasonably high fees, while at the same time exposing investors to massive amounts of climate-related financial risk that threaten to wipe out years of savings under any number of highly plausible scenarios.” The complaint asserted claims that the defendants breached their fiduciary duty to monitor plan investments and remove imprudent investments as well as their duties of prudence and loyalty under ERISA. In addition, the complaint asserted claims that the Investment Committee engaged in prohibited transactions with Fidelity Investments, which provided services to the 401(k) plan, and Fidelity Management Trust Company, which was a trustee and provided services to the plan. The complaint also asserted that Cushman failed to monitor the Investment Committee. The plaintiff sought declaratory relief as well as an order requiring payment of an amount or surcharge necessary to make the 401(k) plan whole for losses resulting from the breaches. Other relief sought included appointment of a special master to oversee development and implementation of a revised investment policy statement (IPS) for the 401(k) plan that provides procedures specific to “standards for climate-competency and emergent risk management assessment” within the Investment Committee and specific climate-risk mitigation and monitoring requirements for plan menu options, as well as non-climate-related procedures. The complaint asked the court to require the defendants to assess investment options based on the IPS and remove investment options deemed imprudent.

Former employee's action alleging that Cushman & Wakefield breached fiduciary duties by selecting and retaining investment options in Cushman’s 401(k) plan “in spite of numerous glaring red flags," including climate change-related financial risk.

Kvek v. Cushman & Wakefield, US, Inc.

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Former Cushman & Wakefield Employee Filed ERISA Suit Alleging Breach of Fiduciary Duties Due to 401(k) Plan’s Exposure to Climate Risk and Other Factors

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An aim to achieve a quantifiable outcome within a given time-frame, set by an institution such as a national government.

Policy instruments are techniques or tools used by governing authorities to promote certain policies in order to achieve predetermined goals. Put simply, instruments are how a government tries to achieve its goals, with this taxonomy being focused on national policy instruments.

Risk is the potential for adverse consequences resulting from the dynamic interplay between (climate-related) hazards, exposure, and vulnerability of affected human or ecological systems.

Groups  of people who are adversely affected by climate change or the response to it

A set of principles, processes, and practices that build economic and political power to shift from an extractive economy to a regenerative economy.

Justice is the ethical and political framework that addresses fairness, including issues of responsibility, rights, and structural inequity.

Renewable energy means all forms of energy produced from renewable sources in a sustainable manner.

Fossil fuel is a generic term for non-renewable energy sources such as coal, fossil gas, and oil (including crude oil, and petroleum products), that can be used for electricity and heat generation. Fossil fuels are hydrocarbons formed from pressurised and heated organic material buried over millions of years.

Molecules in the atmosphere that play a key role in the greenhouse effect by trapping heat radiating from Earth’s surface.

Area of the economy in which actors engage in identical or related activities.

In human systems, the process of adjustment to actual or expected climate change and its effects, in order to moderate harm, increase resilience or exploit beneficial opportunities. In natural systems, the process of adjustment to actual climate change and its effects; human intervention may facilitate adjustment to expected climate change and its effects.

The management and allocation of funds, assets and investments to meet various objectives

A loan is a policy instrument where funds are provided to a borrower with the expectation of repaying the principal plus interest.

Financial support to help individuals manage the effects of unexpected events, securing their livelihoods and increasing the resilience of people and businesses to the changing climate. It’s especially vital in developing regions where everyday risks, climate-related weather extremes, or crop failures can push people into poverty. Without insurance, people may have to resort to selling assets or cutting consumption to cope with losses.

The processes through which enterprises can identify, prevent, mitigate and account for how they address their actual and potential adverse impacts. Due diligence is the idea that reasonable precautions should be taken to avoid causing harm to people, the environment, or society. It also involves identifying and mitigating risks before they occur.

A financial institution that manages a country's currency and can promote climate-related initiatives through green monetary policy and other means.

Either money or something of monetary value is transferred between two or more organisations, people or countries.

Conditions that enhance the feasibility of adaptation options. Enabling conditions include finance, technological innovation, strengthening policy instruments, institutional capacity, multi-level governance and changes in human behaviour and lifestyles.

Hot temperature extremes are daily maximum temperatures  that were exceeded on average once in a decade or once in 50 years, and includes heatwaves.

The release of heat-trapping gases, primarily from human activities such as burning fossil fuels, agriculture and industry.

Actions to reduce emissions in energy generation and supply.

Technologies that capture and hold energy in reserve for later use.

Risks to the ecosystem health of the marine environment, including ocean warming, ocean acidification, and ocean deoxygenation, harming biodiversity, species health, ecosystem services, and coastal community livelihoods.

Extreme weather refers to events where a weather variable exceeds (or falls below) a threshold. Meaning it is significantly different from the average or usual weather pattern.

A drought is an extended period of unusually dry weather marked by a significant and sustained lack of precipitation, falling below a specific threshold over a large area for more than a month

Terrestrial means "of the earth" and relates to the risks to ecological system that includes all living organisms and their interactions within land-based environments, such as forests, grasslands, and deserts.

Social protection systems consist of policies that help people manage social risks in order to prevent poverty and maintain decent incomes and living standards

Fossil gas, commonly known as natural gas, is a fossil fuel consisting chiefly of methane with smaller amounts of other hydrocarbons and trace gases, found in underground deposits.

Coal is a combustible sedimentary rock formed from carbonised plant matter, rich in carbon and hydrocarbons, and occurring in several main types including hard coal and brown coal.

Any compulsory, unrequited payment to the government levied on corporations or individuals. This can be for environmental reasons, such as introducing a Carbon tax to set a price that emitters must pay for the greenhouse gases they emit.

The activities of industries involved in the production, distribution, and sale of energy, including electricity, gas, and renewables.

Activities that involve planning, designing and building infrastructure, residential, and commercial structures.

This sector involves activities to move goods and people, alongside the storage of products.

Activities that provide lodging, food, and entertainment services to guests, including hotels, restaurants, and resorts.

This sector creates and distributes information and entertainment through television, radio, print, and digital platforms.

This sector provides communication services, software development, and IT solutions.

Activities of government agencies and institutions that provide public services, enforce laws and manage public resources.

This sector includes firms and individuals offering specialised expertise in fields such as law, accounting, consulting, science and engineering.

Activities involving the management, development, and sale of property assets.

Activities of businesses and institutions that provide financial services and products to individuals and organisations.

Activities that involve the cultivation of crops and raising of livestock for food, fibre, and other products essential for human life and industry.

Slow onset events evolve gradually from incremental changes over many years or from increased frequency or intensity of recurring events. As defined in the Cancun Adaptation Framework (2010), slow onset events include risks and impacts from rising temperatures, desertification, biodiversity loss, land and forest degradation, glacial retreat, ocean acidification, sea level rise, and salinization.

Former Cushman & Wakefield Employee Filed ERISA Suit Alleging Breach of Fiduciary Duties Due to 401(k) Plan’s Exposure to Climate Risk and Other Factors

Policy instrument

Risk

Just transition

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Adaptation/resilience

Finance