ESG just can’t catch a break.
The Wisconsin Institute for Law and Liberty (WILL) is the latest to file a lawsuit against the Biden Administration for permitting the use of environmental, social, and governance (ESG) factors in 401(k) accounts under the Department of Labor’s (DOL) final rule.
The conservative nonprofit law firm filed the suit on Tuesday, accusing the administration of violating the Employee Retirement Income Security Act of 1974 (ERISA) and the Administrative Procedure Act. The suit requests a temporary restraining order and preliminary injunction halting the rule. The ESG rule was enacted on January 30.
The suit names two plaintiffs—Richard Braun, an operations manager for SWAT environmental, a soil, water, and air technologies company providing radon mitigation and other services, and Frederick Luehrs III, a maintenance supervisor with Petron Corporation.
Counsel with the WILL doubled down on longstanding conservative arguments against ESG and dismissed sustainable investing as a “fad”—claiming that by centering climate change and racial justice into investment strategy, the rule prioritizes political considerations over risk and return.
“By injecting highly partisan issues—like climate change and racial justice—into investment strategy, the Biden Administration is jeopardizing the retirement income of over 140 million Americans. Their new rule far exceeds the law and their constitutional authority,” said WILL Associate Counsel, Kate Spitz, in a statement.
The complaint also draws on documenting requirements under the new rule, which allows for non-pecuniary factors on the basis that the two investments equally serve the interests of the plan. Under the new plan, fiduciaries would not be required to document the decision for their investment choices.
Plaintiffs in the suit allege that the document requirement adds paper trail—and thus, a layer of protection—for plan participants and beneficiaries in the case that a participant would sue the plan sponsor.
WILL also signed a coalition earlier this month along with other conservative outlets and organizations, and again rejected ESG as a liberal political agenda in its statement.
This is the second lawsuit to appear against the ESG rule since the start of the year. In January, a coalition of 25 states sued the DOL in an effort to halt the rule before it went into effect.
SEE ALSO:
- Democrats Push for ESG in Retirement Plans with New Bill
- Coalition of 25 States Sue Biden Administration on ESG Final Rule
- DOL’s Walsh, Gomez Discuss New ESG Rule
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
