The U.S House of Representatives voted on Tuesday to block the Department of Labor’s (DOL) final rule on environmental, social, and governance (ESG) investing, in the latest attack since the rule was announced in November.
The Republican-led Congressional Review Act (CRA) passed in a 216 to 204 vote, with one Democrat, Rep. Jared Golden (D-Maine), voting alongside Republican representatives. The resolution would halt the DOL from enforcing the rule, which allows for plan fiduciaries to consider ESG factors in retirement plan investment decisions. The DOL’s final rule has been in effect since January 30.
ESG investing has been met with extreme opposition and resistance from Republican officials and fossil fuel companies, many who accuse the Biden Administration of using “woke” politics to invest employee retirement savings in sustainable and progressive causes. There are currently two lawsuits filed against the rule, one from a conservative nonprofit that accused the Biden Administration of violating the Employee Retirement Income Security Act of 1974 (ERISA) and the Administrative Procedure Act, and the other filed by a coalition of two dozen Republican-backed states.
“Today, @HouseGOP stood up for retail investors and advanced my bill to ensure employer-sponsored retirement plans are focused on maximizing financial security, not a political agenda,” tweeted Rep. Andy Barr (R-KY), the resolution’s sponsor, after the measure was passed.
The measure is now off to the Senate, who may decide on a vote as early as Wednesday. While the Senate comprises of a 51-49 Democratic majority, Sen. Joe Manchin (D-WV) has previously voiced his disapproval of the rule. If passed, the resolution would go to Biden, who the White House has said would use his first veto on it.
In the midst of opposition, Dems and orgs push for impact investing
On the other end, Democrats have pushed for new legislation protecting employers who want to invest in sustainable factors. In February, Sen. Tina Smith (D-MN) reintroduced The Freedom to Invest in a Sustainable Future Act, which would defend employers offering ESG factors in workplace retirement plans.
“Sustainable investment options are good for retirees and good for our environment—that’s a win-win,” said Smith, in a statement. “I’m putting forth this legislation because we know there’s a growing demand for sustainable investing, and Congress should act now to provide the legal certainty necessary to make sure workplace retirement plans are able to offer these options to workers across the country.”
Following the resolution’s vote, the Congressional Sustainable Investment Caucus, led by Rep. Sean Casten (D-IL) and Rep. Juan Vargas (D-CA) condemned the House for barring investors to sustainable options.
“Retirement plan fiduciaries should be free to consider climate change and other ESG factors without regulatory barriers or the threat of litigation,” Casten and Vargas wrote in a joint statement. “The rule from the Department of Labor does not require fiduciaries to consider ESG factors, it merely allows them to do so if it is in the best interest of their plan participants. This CRA resolution is the latest dangerous move in Republican’s anti-worker and anti-free market agenda.”
Sustainable investing advocacy organization Ceres Accelerator, who hosted a webinar alongside DOL Secretary Marty Walsh and Assistant Labor Secretary Lisa M. Gomez earlier last month, commented on the CRA’s passage and opposed the challenge to the rule.
“The rule was prepared after careful consideration of the extensive and overwhelmingly supportive submissions. Despite efforts from special interests to cast the new rule as political, it merely restores the government’s neutral stance, requiring fiduciaries to use their best professional judgment to make investment decisions,” said Steven M. Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets at Ceres, in a statement.
“Climate-related disasters are becoming increasingly frequent,” he continued. “With this new rule in play, there is more opportunity to give Americans the options to invest in funds aligned with their values and safeguard their retirement savings from climate risks.”
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