While the bill would allow plan fiduciaries the option to consider ESG factors when making investment decisions, it does not mandate they do so.
That's a point Labor Department officials have made since the final version of the rule was unveiled in November.
Lisa M. Gomez, assistant secretary of labor for the Employee Benefits Security Administration, said the department considers the rule as a "return to neutrality and based on basic principles of ERISA," during a webinar earlier this month hosted by Ceres, a non-profit group working to advance sustainable investing.
The new 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 on casting a proxy vote.
Ms. Gomez has said the Trump-era rules caused investor confusion and had a chilling effect on the integration of ESG factors into fiduciaries' investment decisions, which led to missed opportunities.
Elected Republicans in Congress and across the nation oppose the new rule.
Republican attorneys general from the 25 states filed a lawsuit Jan. 26 in U.S. District Court in Amarillo, Texas, arguing that the Labor Department's rule undermines key protections for retirement savers, oversteps the department's authority under the Employment Retirement Income Security Act, and is arbitrary and capricious.
And earlier this month, every Senate Republican, led by Sen. Mike Braun of Indiana, along with Sen. Joe Manchin, D-W.Va., and Rep. Andy Barr, R-Ky., reintroduced a joint resolution under the Congressional Review Act to nullify the rule. The CRA 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 legislation introduced Thursday aims to solidify the new rule into law.
"Sustainable investment options are good for retirees and good for our environment — that's a win-win," Ms. Smith said in a news release. "I'm putting forth this legislation because we know there's a growing demand for sustainable investing, and Congress should act now to provide the legal certainty necessary to make sure workplace retirement plans are able to offer these options to workers across the country."
The bill, which was first introduced in May 2021, is co-sponsored by Senate Democrats Patty Murray of Washington, Dianne Feinstein of California, Richard Blumenthal of Connecticut, Dick Durbin of Illinois, Elizabeth Warren of Massachusetts, Ron Wyden of Oregon, Ed Markey of Massachusetts, and Sen. Bernie Sanders, I-Vt.