Biden May Face First Veto as Congress Moves to Disapprove DOL ESG Rule
President Joe Biden may soon be faced with the decision of issuing the first veto of his presidency as Congress is expected to pass a resolution disapproving of a Department of Labor rule allowing retirement plan managers to factor environment, social and governance (ESG) into their investment decisions. The White House has already warned that the President will veto the bill if it is sent to his desk, and if it passes both houses of Congress, he would have to issue the veto in order to prevent it from becoming law.
In response to the resolution, Representatives Suzan DelBene (WA-01), Sean Casten (IL-06), Juan Vargas (CA-52), and Dean Phillips (MN-03) have introduced the Freedom to Invest in a Sustainable Future Act, which would allow workplace retirement plans to consider ESG factors when selecting and monitoring investments and use those factors as collateral benefits to break ties between otherwise equal investment options. The legislation has been endorsed by the Congressional Sustainable Investment Caucus, and Sen. Tina Smith (D-MN) has also reintroduced the bill in the Senate.
Rep. Andy Barr's (R-KY) resolution to reverse the DOL rule is scheduled for consideration in the House on February 27th, and Sen. Mike Braun (R-IN) is expected to bring the resolution to the Senate floor with the support of every Republican, plus Democratic Sen. Joe Manchin (WV).
The Trump-era DOL rule from 2020, which said that in order to consider collateral factors as a tiebreaker, competing investments must be otherwise indistinguishable, was a key element of a lawsuit brought in Wisconsin on Tuesday challenging the legality of the DOL’s ESG rule. The lawsuit alleges that by not requiring documentation of collateral considerations, fiduciaries can avoid leaving a paper trail which could then be used against them later in litigation.
In a statement, Rep. Sean Casten, co-chair of the Congressional Sustainable Investment Caucus, emphasized the intersection of financial returns and ESG and said, “Climate risk is financial risk. Retirement plan fiduciaries should be free to consider climate change and other ESG factors without regulatory barriers or the threat of litigation. I’m proud to support this legislation that gives workers the option to invest in the best plans for their future.
0. “Senator Explains Reasoning Behind Pro-ESG Bill: ARA Exclusive” National Association of Plan Advisors, 24 Feb. 2023, https://www.napa-net.org/news-info/daily-news/senator-explains-reasoning-behind-pro-esg-bill-ara-exclusive
1. “House Committee Takes Up Anti-ESG Resolution” National Association of Plan Advisors, 27 Feb. 2023, https://www.napa-net.org/news-info/daily-news/house-committee-takes-anti-esg-resolution
2. “Congressional Democrats Try to Make DOL ESG Rule the Law” Chief Investment Officer, 24 Feb. 2023, https://www.ai-cio.com/news/congressional-democrats-try-to-make-dol-esg-rule-the-law
3. “Representative DelBene Proposes Legislating DOL's ESG Rule | PLANSPONSOR” PLANSPONSOR, 24 Feb. 2023, https://www.plansponsor.com/representative-delbene-proposes-legislating-dols-esg-rule/
4. “Sustainable Investment Caucus Endorses Bill for Pensions” Markets Media, 28 Feb. 2023, https://www.marketsmedia.com/sustainable-investment-caucus-endorses-legislation-for-retirement-plans/