House Republicans on Thursday failed to overturn a presidential veto in their quest to nullify a Department of Labor rule allowing retirement plan fiduciaries to consider climate change and other environmental, social and governance factors when selecting investments and exercising shareholder rights.
The 219-200 vote, including one Democratic vote in support, did not garner the two-thirds majority needed to overturn a veto.
President Joe Biden on Monday issued the first veto of his administration after the House and Senate on Feb. 28 and March 1, respectively, approved a joint resolution under the Congressional Review Act to nix the Labor Department rule. 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.
The rule— 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.
The Feb. 28 House vote was 216-204 in support of the resolution with all Republicans and one Democrat — Rep. Jared F. Golden of Maine — voting in favor.
Elected Republicans have said the Labor Department rule jeopardizes retirement savings for millions of Americans for a political agenda, but 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.