U.S. House votes to block Biden’s ESG plan
By a vote of 216-204, the U.S. House of Representatives voted to halt a Biden administration rule that would permit fiduciaries directing retirement plans to use environmental, social, and governance (ESG) considerations when making investment decisions, as The Hill reports.
The outcome was determined on a nearly party-line basis, with Democratic Rep. Jared Golden (ME-02) the only member of his party to join Republicans in the effort.
Controversial rule blocked
The provision at issue was enacted by the Labor Department last year, and it paved the way for investment fund decision makers to consider things such as climate change and other variables not centered entirely on returns and profitability, as National Review explained.
In the eyes of a Republican lawmakers, the concept represents another “woke” initiative likely to harm those relying on investments to fund their retirement years.
Republican Rep. Andy Barr (KY-06) introduced the proposal blocking the Biden rule, and in doing so, declared, “This Congressional Review Act measure that I am offering is a bipartisan, bicameral joint resolution disapproving of a Department of Labor rulemaking that will politicize Americans' retirement accounts and jeopardize their retirement security.”
In Barr's estimation, the result of the Biden rule would be to stick Americans with funds carrying higher fees but delivering lower performance due to the lack of diversification in the investment mix.
Senate to follow suit, but veto likely
As the Washington Examiner reports, the Senate on Wednesday also appeared poised to support a GOP measure that would block the ESG rule for retirement funds promulgated by the Biden Labor Department.
Despite the Democratic majority in upper chamber, defections from Sens. Joe Manchin (D-WV) and Jon Tester (D-MT) gave Republicans the votes necessary to succeed in passing the proposal, and reports that Sen. Angus King (I-ME) was also leaning in that direction could give the GOP some extra cushion.
However, President Joe Biden has already vowed to veto the legislation, which – at least for now – means that the rule will likely remain in place.
The White House explained the president's position on the Labor Department's provision in a statement that said, “The rule reflects what successful marketplace investors already know – there is an extensive body of evidence that environmental, social, and governance factors can have material impacts on certain markets, industries, and companies.”
State initiatives take aim at ESG
It is not only at the federal level that ESG investment considerations have become part of a serious policy debate, with Florida Republican Gov. Ron DeSantis also bringing the issue front and center in his state.
As National Review reported separately, DeSantis recently unveiled a series of proposals designed to crack down on the application of ESG principles in investments involving state and local money.
A key part of DeSantis' desired legislation is the statutory codification of a prohibition on the use of ESG criteria in investment decisions pertaining to state and local government pensions for police officers, firefighters, and teachers.
While promoting the proposal in February, DeSantis said, “Today's announcement builds on my commitment to protect consumers' investments and their ability to access financial services in the Free State of Florida. By applying arbitrary ESG financial metrics that serve no one except the companies that created them, elites are circumventing the ballot box to implement a radical ideological agenda.”
Debate to continue
Though Biden has yet to exercise his veto power since taking office, it appears all but certain that the prohibition on the use of ESG rules in retirement fund investments is enough to prompt just such an act.
Even before it was officially known how many Senate Democrats might side with Republicans on the matter, the White House said, “The president will continue to deliver for America's workers. If the president were presented with H.J. Res. 30, he would veto it,” as Fox News noted.
Were that to occur, Congress would need to re-approve the resolution with a two-thirds majority in the House and the Senate in order to override the veto, a scenario that is difficult to envision, given the current makeup of the legislature.
Even so, it seems clear that the controversy over ESG investment practices is not going away any time soon, with the topic likely to play a role in the 2024 presidential election. As Republican congressional candidate and current West Virginia Treasurer Riley Moore put it, according to the Examiner, “It's gonna be part of this national conversation, I think. If you're at the national level, they are taking about this issue.”