"I just signed this veto because the legislation passed by the Congress would put at risk the retirement savings of individuals across the country," Mr. Biden said in a video posted to his Twitter account.
The rule in question — Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights — took effect Jan. 30 and allows ERISA fiduciaries to consider ESG factors. It also maintains the department's position that fiduciaries may not sacrifice investment returns or assume greater investment risks as a means of promoting collateral social policy goals.
The rule is a reversal of two rules promulgated late in the Trump administration that said retirement plan fiduciaries could not invest in "non-pecuniary" vehicles that sacrifice investment returns or take on additional risk and outlined a process a fiduciary must undertake when making decisions about casting a proxy vote.
Sen. Mike Braun, R-Ind., who introduced the resolution in February, said at a March 1 news conference that the new Labor Department rule jeopardizes retirement savings for millions of Americans for a political agenda.
Mr. Braun's colleague, Sen. Bill Cassidy, R-La., ranking member on the Senate Health, Education, Labor, and Pensions Committee, in a statement Monday condemned the veto. "Asset managers' only priority should be helping Americans achieve the best return for their retirement, not using their clients' money to fund a political agenda," Mr. Cassidy said. "By vetoing this bipartisan resolution, President Biden is jeopardizing the retirement of 152 million Americans."
Labor Department officials and retirement industry stakeholders contend that the rule is neutral.
Ali Khawar, principal deputy assistant secretary of the Labor Department's Employee Benefits Security Administration, said the political backlash to the rule is misguided.
"It's unfortunate because there's a huge amount of misinformation out there about what the final rule actually did," Mr. Khawar said at Pensions & Investments' Defined Contribution East Conference in Orlando, Fla., on March 13. "The final rule is quite neutral. It does not mandate the consideration of ESG, it does not mandate that everyone has to buy Amazon rainforest property and make sure that they do everything to stem the cause of climate change or anything else. What it does is say that you have to be a prudent fiduciary."
Bryan McGannon, acting CEO and managing director of US SIF: The Forum for Sustainable and Responsible, said in a statement that the veto will allow "retirement marketplace actors to continue fulfilling their fiduciary duty to plan participants and meet the growing demand for sustainable offerings. The Department of Labor's ESG rule is a sensible policy allowing retirement plan fiduciaries to consider all financially relevant information when making investment decisions. This is good for plan participants and beneficiaries."
With Mr. Biden's veto, the rule will remain in effect, though it's also facing legal challenges, including one filed in January by Republican attorneys general from 25 states.