The US House of Representatives has approved legislation aimed at blocking a new law allowing the consideration of climate and ESG factors by retirement plan fiduciaries.
The legislation passed with a 216-204 vote in the House, with the resolution sponsored by Congressman Andy Barr (R-KY). The bill will now go to the Senate. If approved, President Biden has said he would veto the legislation.
According to ESG Today, the resolution is aimed at disapproving the Department of Labor’s ‘Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights’ rule passed back in December.
The rule allowed fund managers for ERISA plans to include ESG considerations in the investment process, and also allowed climate and ESG factors to be considered by fiduciaries when exercising shareholder rights, such as in proxy voting, but required that considerations “must be based on factors that the fiduciary reasonably determines are relevant to a risk and return analysis,” such as the economic effects of climate change or other ESG factors on an investment.
Back in June 2020, President Trump’s DOL announced a proposed rule that would have put strict limits on ESG investing in ERISA plans.
The DOL’s ruling marked a major reversal of a Trump administration move to block the integration of climate and ESG factors in these funds. In June 2020, the Trump administration DOL announced a proposed rule that effectively would put strict limits on ESG investing in ERISA plans.
The resolution to block the rule is being brought using the Congressional Review Act, through which members of Congress may vote to disapprove rules within 60 days of their implementation, and prevent similar rules from being implemented in the future.
The White House said, “To be clear, the 2022 rule is not a mandate – it does not require any fiduciary to make investment decisions based solely on ESG factors. The rule simply makes sure that retirement plan fiduciaries must engage in a risk and return analysis of their investment decisions and recognizes that these factors can be relevant to that analysis.
“If DOL were to revert to the 2020 rule, the federal government would be interfering with the market in a manner that stands in the way of retirement plan fiduciaries’ ability to protect these hard-earned retirement savings and pensions and unnecessarily limit the options available to retirement plan participants and investors.”
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Governor of Florida Ron DeSantis recently barred fund managers for state and local entities in the state from considering ESG factors in investment decisions.
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