Greenhouse gas emissions and the resulting warming are causing significant, deleterious consequences for the global economy. Those harms are predicted to grow. Prior studies estimate that unmitigated climate change will cut the world economy by $23 trillion by 2050; a recent study indicates that the long-term costs may be six times higher than previously estimated.[1],[2]

These effects will have a particularly significant impact on workers saving for retirement. Retirement plan beneficiaries have long investment horizons, and “[t]he longer term the investment horizon, the more likely it is that climate will not only be a material risk, but the most material risk.”[3] Climate portfolio risk to retirement plans will be difficult to mitigate. An International Finance Corporation report concludes that “the traditional way of managing risk through a shift in asset allocation into increased holdings of more conservative, lower risk, lower return, asset classes may do little to offset climate risks.”[4]

While our Company has taken actions to address its operational greenhouse gas emissions,[5] it has not acted to meaningfully address the emissions generated by its retirement plan investments. The plan’s most popular option by assets invested is the Vanguard Target Retirement Funds series. The funds in this series account for 29% of plan assets.[6] These funds invest heavily in high-carbon companies and companies contributing to deforestation.[7]

High-carbon and deforestation-risk retirement plan investments are especially perverse when viewed from the perspective of younger workers with longer term investment time horizons.[8] Such investments help fuel the climate crisis and lock in future temperature increases, making worst-case economic scenarios more likely. The retirement savings of younger workers will therefore suffer relatively higher impact from climate-related declines in global GDP than older workers’ retirement savings. Many of the anticipated financial costs of climate change are already being experienced by Qualcomm employees. A recent report found that Qualcomm 401(k) participants could have earned an estimated $245 million in additional returns if the plan had not been invested in fossil fuels over the past ten years.[9]

The Company’s high carbon retirement plan may also contribute to difficulty in worker recruitment and retention, as polling indicates employee demand for responsible retirement options.[10]

Federal law requires that retirement plan fiduciaries act in beneficiaries’ best interests and ensure prudence of the plan’s investments. Recent regulatory amendments have confirmed that managing material climate risk is an appropriate consideration for retirement plan fiduciaries.[11] The Company can best ensure that it is meeting its obligations to employees — especially younger employees — by appropriately mitigating climate risk in its retirement plan investments.