Plaintiffs Pursue New Strategy Focused On Climate Risk In ERISA Fee Litigation

ERISA fee litigation focused on alleged investment underperformance has been active for many years. In Kvek v. Cushman & Wakefield, Case No. 2:26-cv-736 (W.D. Wash., filed March 3, 2026), plaintiffs have taken a new tack, alleging that one fund underperformed due to investments in companies impacted by climate risk and that plan fiduciaries breached their duties by failing to analyze and account for such risk. The recently filed complaint in Kvek is the first of what may be a new trend in ERISA fee litigation, and it remains to be seen how courts will rule on these claims. This update discusses the climate-risk allegations, challenges we see with plaintiffs’ approach, and tips for fiduciaries.

Plaintiff’s climate-risk allegations. Plaintiff’s allegations in Kvek focus on the Westwood Quality Small Cap Fund and claims that it missed its benchmarks because it was supposedly exposed to climate risk through its component investments. Plaintiff contrasts this alleged risk with the Plan sponsor’s alleged adoption of a “sophisticated climate risk strategy” that did not extend to the performance of fiduciary responsibilities in connection with its plan.

The complaint attempts to establish, through citations to academic and press articles, that current economic policy and investment standards purportedly recognize that climate risk must always be evaluated before making an investment.

Although the Kvek complaint alleges that the Westwood fund supposedly failed to meet its benchmarks, it does not allege when the plan invested in the fund or how long the fund was offered as an investment option. The complaint is also vague about why the Westwood fund purportedly fails to pass muster. Without specifying what component investments rendered the fund unfit, the complaint merely notes that its bad investments could include agriculture, buildings (without further explaining the term), “energy intensive manufacturers,” and transportation providers.

It remains to be seen whether a court will find that allegations, like those in Kvek, plausibly state a claim to survive a motion to dismiss in federal court. However, such allegations appear deficient in that there are no specific allegations that explain how the Westwood fund was imprudent beyond the claim that it was exposed to climate risks. This is underscored by the Kvek complaint’s acknowledgement that climate risks are ubiquitous, which would cut across and seemingly render all investments suspect.

Fundamentally, the Kvek complaint fails to acknowledge that hard financial analysis involving the dual axes of investment return and profitability are supposed to drive fiduciary plan investment decisions. Like recently repudiated ESG investments, plan fiduciaries face risks if they deviate from pure economic analyses of investments, using raw economic benchmarks. We will see whether ERISA fee litigation focused on climate risk will gain traction as we have seen with complaints targeting recordkeeping fees, target date funds, and other investments.

Tips for Plan Fiduciaries. While the angle is novel, the best practices for Plan fiduciaries remain the same. Plan fiduciaries are best served by monitoring their investments continuously and documenting that prudent fiduciary process. A prudent fiduciary process is key to defending any ERISA claim. Fiduciaries should ensure that their deliberations are considered and documented, including documenting the factors taken into account when selecting and monitoring investment options.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.