In a lengthy hearing on Wednesday that focused mainly on the labor market, child labor breaches and worker safety, Julie Su, acting secretary of labor, defended the department's new environmental, social and governance rule.
Rep. Rick Allen, R-Ga., pressed Ms. Su, President Joe Biden's nominee for labor secretary, on the rule, which took effect Jan. 30 and permits retirement plan fiduciaries to consider ESG factors when selecting investments and exercising shareholder rights.
"Our ESG rule did not require financial advisers to do anything in particular," Ms. Su said in testimony before the House Education and the Workforce Committee. "What it did was give them the flexibility."
Congressional Republicans, who as a whole oppose the rule, with help from a handful of Democrats, in 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, but Mr. Biden subsequently vetoed the resolution.
Mr. Allen introduced a bill last year with Rep. Andy Barr, R-Ky., similar in scope to a rule finalized 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. Mr. Allen said he's working on reintroducing the bill during this Congress.
Under the Biden administration, the Labor Department rescinded the Trump-era rule.
On Tuesday, Ali Khawar, principal deputy assistant secretary of the Labor Department's Employee Benefits Security Administration, said the rule is neutral and doesn't require consideration of ESG factors when making an investment decision.
But in January, Republican attorneys general from 25 states filed a lawsuit in U.S. District Court in Amarillo, Texas, arguing that the rule undermines key protections for retirement savers, oversteps the department's authority under the Employment Retirement Income Security Act and is arbitrary and capricious.
Separately, Mr. Allen asked Ms. Su about the department's efforts concerning fiduciary investment advice. The Labor Department is currently working on a rule-making initiative that could broaden who's considered a fiduciary under ERISA by amending the regulatory definition of the term fiduciary.
Though Ms. Su did not get into specifics, she said the department will listen to all stakeholders when crafting the rule.
Ms. Su's nomination for labor secretary, which advanced out of the Senate Health, Education, Labor and Pensions Committee in April in an 11-10 party-line vote, is in a precarious place. No Republicans supported her confirmation as deputy labor secretary in 2021, and none are expected to do so this time, which means the vote will be narrow. A vote in the full Senate has not yet been scheduled.
