Republicans in the House have introduced another bill aimed at blocking ESG considerations, this time targeting ERISA retirement plan fiduciaries and investment advisers.
Reps. Andy Barr, R-Ky.,and Rick Allen, R-Ga., reintroduced the Ensuring Sound Guidance (ESG) Act Wednesday, to amend ERISA so that retirement plan fiduciaries can only consider "pecuniary factors" when making investment decisions and amend the Investment Advisers Act of 1940 so that investment advisers must do the same.
In a news release announcing the bill, the GOP lawmakers called out the Labor Department's ESG rule, finalized in November, which explicitly allows plan fiduciaries to consider ESG factors when making investment decisions and exercising shareholder rights.
"This critical legislation not only guarantees that advisers make prudent investment choices based on financial factors, but also empowers savers to decide how their money is invested, contrary to the Department of Labor's (DOL) finalized rule," Mr. Barr said in the news release.
In March, President Joe Biden used the first veto of his presidency to overturn a joint resolution from Congress that would have nullified the Labor Department's ESG rule.
The new DOL rule reverses two Trump-era rules that said fiduciaries of retirement plans could not invest in "non-pecuniary" vehicles that sacrifice investment returns or take on additional risk and outlined the process for a fiduciary to take when making decisions about casting a proxy vote.
Ali Khawar, principal deputy assistant secretary of the DOL'S Employee Benefits Security Administration, said earlier this month that those rules caused a "chilling effect."
"A lot of people were telling us that the Trump administration put their thumb on one side of the scale," Mr. Khawar said at the Defined Contribution Institutional Investment Association and SPARK's public policy forum. "Our solution was not then to put a thumb on the other side of the scale, but instead to take our finger off the scale entirely. It is up to the investment decision maker to decide what is appropriate in any given circumstance."
However, that's not how Mr. Barr and Mr. Allen, nor many Republican officials across the country, see it. Just last week, the North Carolina legislature passed a Republican-led bill to block state entities from considering ESG factors when making investment and employment decisions, using similar language to require that the state treasurer only use "pecuniary factors" to evaluate investments.
The bill led by Mr. Barr and Mr. Allen also directs the comptroller general and the SEC to conduct a series of studies on how ESG objectives impact underfunded state and local pension plans.
"As Americans continue to grapple with the financial burden of higher costs across the board, we must take meaningful action to protect ERISA retirement plans from this administration's endless pursuit of their costly, rush-to-green agenda," Mr. Allen said in the news release.
