On Wednesday, U.S. Senator Katie Britt and a bipartisan group of 49 additional Senators voted to overturn the Biden Administration’s ESG rule, which Republicans argued endangered the retirement investments of 152 million Americans by prioritizing political causes over the best financial returns.
Under the Congressional Review Act (CRA), the Senate voted to block the rule in a 50 to 46 vote. An identical disapproval resolution passed in the House on Tuesday in a 216-204 vote. With Senate passage, the resolution now heads to the desk of President Joe Biden, who has vowed to veto the measure.
“Today, I proudly voted to protect the hardworking Americans and retirees who are already being crushed by generationally high inflation fueled by the Biden Administration’s wasteful tax-and-spend spree and reckless Green New Deal agenda,” said Sen. Britt. “The simple fact of the matter is that inflation is up 14.4% since President Biden took office, and retirees lost 23% of their 401(k) savings last year alone. The last thing Alabama families can afford right now is their hard-earned retirement savings funding someone else’s political agenda instead of their own future. Fiduciaries should put the financial well-being of their investors first, not politics. And it is past time for President Biden to put hardworking American families first instead of his own reckless political agenda.”
In November, Biden’s Department of Labor instituted a rule permitting ERISA retirement plan fiduciaries to consider environmental, social, and corporate governance (ESG) factors when selecting investments and exercising shareholder rights.
“The Biden administration can’t keep its hands off of Americans’ finances,” said Sen. Tommy Tuberville. “Meddling in 401(k) investments through overregulation restrains financial growth and restricts personal liberty. The federal government shouldn’t choose winners and losers in the investment game. Bureaucrats have no business telling hardworking Americans how to manage their savings accounts. My bill ensures that everyone who earns a paycheck has the financial freedom to invest in their futures however they see fit.”
The Biden Administration decree overturns a previous rule which mandated fiduciary decisions be made solely on getting the best returns for the 152 million American workers that depend upon ERISA for their retirement. ERISA covers most employer-sponsored retirement plans, totaling about $11.7 trillion in assets.
Under this rule, retirement fund managers can choose to prioritize ESG factors instead of financial returns in their investment decisions for workers’ hard-earned savings. Plan participants could unknowingly be enrolled in ESG funds, which may not align with their political views. In the most recent survey, most Americans think it’s a bad idea for companies to use their financial influence to advance a political or social agenda, as is the case in ESG investing.
Alabama Attorney General Steve Marshall and 24 other attorneys general have filed a lawsuit opposing the rule allowing 401(k) managers to direct their clients’ money to ESG investments. The conservative AGs are concerned that the rule undermines the protections for retirees outlined in the Employee Retirement Income Security Act of 1974 (ERISA).
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