House and Senate lawmakers slam Biden’s ESG rule over retirement fund investments

U.S. lawmakers from the House and Senate, including a few Democrats, have criticized the White House over a rule that would permit retirement fiduciaries to invest based on environmental, social and corporate governance (ESG) considerations.

Last year, Joe Biden’s Labor Department released a final rule that aimed to protect the U.S. economy from the financial risk posed by climate change.

The rule reversed a prohibition on ESG investments that had been put in place by the Trump administration, and allowed fiduciaries to consider the economic effects of climate change and other ESG issues as long as these were relevant to risk-and-return analysis, the Daily Wire reported.

The House voted in favor of a resolution to overturn the rule, with 216 votes in favor and 204 against. The Senate approved the resolution 50-46. The measure was introduced by Republican Senator Mike Braun and Representative Andy Biggs. Democrats Jon Tester, Joe Manchin and Jared Golden voted in favor of the resolution, joining Republicans in the vote.

Republican lawmakers celebrated the resolution’s passage as a rebuke of the Biden administration's support of the ESG movement. They criticized the investment philosophy as politically motivated, while some Republican state attorneys general filed lawsuits against the rule, and state treasurers withdrew around $12 billion from asset management firm BlackRock in 2021 over its ESG stance.

Opponents of ESG investing argue that it dilutes fiduciary responsibility by emphasizing social and political goals over returns.

Under the previous Trump administration rule, retirement fund managers were required to base investment decisions solely on financial factors and were prohibited from selecting investments based on non-pecuniary considerations.

Biden is expected to veto the resolution, which would be his administration's first. The White House accused Republicans of imposing their ideology on the private sector and handcuffing investors by forcing them to ignore ESG issues.

“Republicans talk about their love of free markets, small government, and letting the private sector do its work. The Republican bill is opposite of that,” said White House Press Secretary Karine Jean-Pierre on Wednesday. “It forces MAGA Republicans’ ideology down the throats of private sector and handcuffs investors as well.”

ESG could become a key issue in the Republican presidential primary, with former President Donald Trump and Florida Governor Ron DeSantis, who lead early polls as preferred nominees, opposing its implementation.