President Biden has issued the first veto of his presidency after the Republican-led House of Representatives voted to overturn ESG considerations in ERISA plans.
According to ESG Today, Biden’s veto defended a recently enacted Department of Labor rule that allowed fund managers for ERISA plans to include ESG considerations in the investment process.
Following the veto, Biden countered claims that the rule would lead fund managers to sacrifice financial returns to pursue a political agenda. He added that the Republican resolution would prevent retirement plan fiduciaries from taking into account factors such as climate change risks and poor corporate governance that could affect investment returns.
Biden continued, “There is extensive evidence showing that environmental, social, and governance factors can have a material impact on markets, industries, and businesses. But the Republican-led resolution would force retirement managers to ignore these relevant risk factors, disregarding the principles of free markets and jeopardizing the life savings of working families and retirees.”
Biden’s move blocks recent majority votes in Congress disapproving the DOL’s ESG rule, which took effect as of January 30.
The DOL rule allows fund managers for ERISA plans to include ESG considerations in the investment process, and also allows climate and ESG factors to be considered by fiduciaries when exercising shareholder rights, such as in proxy voting, but also requires that such 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, ESG Today underlined.
Earlier this week, Ron DeSantis, the Governor of Florida, revealed he will head an 18-state alliance aimed at banning the use of ESG considerations in state and local pension funds.
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