Republican lawmakers last week reintroduced a bill that would establish previous regulation on environment, social, and governance (ESG) factors under the first Trump administration.
The “Restoring Integrity in Fiduciary Duty Act,” proposed by Sens. Bill Cassidy (R-LA) and Jim Banks (R-IN), would systemize Trump-era regulation that mandates employers under the Employee Retirement Income Security Act (ERISA) to consider only “pecuniary,” or financial, factors when choosing investments.
“Fiduciaries’ sole responsibility is to prioritize what is best for the workers’ hard-earned savings,” said Cassidy, in a statement. “These pro-worker, pro-family bills protect millions of Americans’ retirement savings from political ideology.”
The bill would amend previous legislation under the Biden administration that allowed fiduciaries to consider investments focused on environmental, social, or governance initiatives.
The Department of Labor (DOL) last month listed in its regulatory agenda plans to completely replace the prior legislation by May 2026. Under the listing, the agency said the new rule would allow fiduciaries to “select investments and exercise shareholder rights based only on financial considerations relevant to the risk-adjusted economic value of a particular investment, and not to advance social causes.”
Along with its objective to deter fiduciaries from consider “pecuniary” factors, the bill also puts focus on how plan sponsors should select identical investments. Under “capita aut navia,” investments that have identical risk and return attributes should be chosen “at random” by fiduciaries. Fiduciaries will also be required to document their decisions.
Meanwhile, Banks also introduced the “Providing Complete Information to Retirement Investors Act,” which would mandate that defined contribution (DC) plans explain to participants the difference between choosing investments picked by ERISA fiduciaries and those selected by participants themselves through a brokerage window.
It would also require plans to notify investors each time they move money into or out of a brokerage window that such investments were not selected by a fiduciary and could result in lower returns.
The two bills have since been referred to the Senate HELP Committee.