The rule, which went into effect Jan. 30, 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.
The Congressional Review Act lets Congress disapprove — by a simple majority vote — a final rule issued by a federal agency if it has not been in effect for more than 60 legislative days. Also, if a joint resolution of disapproval is enacted, the CRA stipulates that a rule may not be issued in "substantially the same form" as the disapproved rule unless it is specifically authorized by a subsequent law.
In filing the CRA resolution earlier this month, Rep. Andy Barr-R-Ky., said in a statement that if Congress "doesn't block the Department of Labor's rule greenlighting ESG investing in retirement plans, retirees will suffer diminished returns on the investment of their hard-earned money."
The same CRA resolution in the Senate has support from all 49 Republicans and Sen. Joe Manchin, D-W.V., meaning the coalition needs one more Democratic vote to pass it. A vote in the Senate will be held this week, Minority Leader Mitch McConnell, R-Ky., said in a tweet Tuesday.
But on Monday, Mr. Biden formally announced his plans to veto the resolution should it pass both chambers of Congress. It would mark the president's first veto of his administration.
In a statement, the White House said the new rule "reflects what successful marketplace investors already know — there is an extensive body of evidence that environmental, social, and governance factors can have material impacts on certain markets, industries, and companies."
A Labor Department spokesman did not respond to a request for comment, but Lisa M. Gomez, assistant secretary of labor for the Employee Benefits Security Administration, has said the department considers the rule as a "return to neutrality and based on basic principles of ERISA."
Aside from efforts in Congress to overturn the rule, two lawsuits challenging it have also been filed in recent weeks, including one last month from a group of 25 Republican state attorneys general.
Democrats in the House and Senate have introduced bills this month to codify the rule into law.
