On Tuesday, the House voted 216-204 to block a Biden administration rule that allows retirement plan fiduciaries to consider environmental, social, and governance (ESG) factors in investment decisions.
The Labor Department enacted a rule last year to make it easier for investors to take into account climate change and other social factors that are not solely focused on profitability and returns for retirees. Republicans have called classified the rule as one of many “woke” moves by the Biden administration that will materially hurt Americans.
One Democrat — Maine representative Jared Golden — also voted to block the ESG investment rule.
“This Congressional Review Act measure that I am offering is a bipartisan, bicameral joint resolution disapproving of a Department of Labor rulemaking that will politicize Americans’ retirement accounts and jeopardize their retirement security,” explained Representative Andy Barr (R., Ky.), who introduced the House measure.
According to Barr, the plan will saddle Americans with higher fees for less-diversified investments in lower-performing portfolios.
The Congressional Review Act is an oversight mechanism Congress can use, overturning final rules issued by federal agencies.
The bill now moves to the Senate, where Democrats have a 51-49 majority. Senate Republicans are unified in supporting the measure and they can also rely on support from Democratic senator Joe Manchin. They need one more vote in order to pass the bill on a simple majority basis.
President Joe Biden could issue his first veto if the bill is successfully sent to his desk.
“The 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,” explained the White House in a statement.
According to Representative Bobby Scott (D., Va.), “consideration of ESG factors is not at odds with making a profit. But if a company has negative externalities, such as carbon-intensive business practices, vulnerability to sea-level rise, high liability risks or a record of mistreating workers who may go on strike, its stock could suffer in the long term.”
Other prominent Republicans also slammed the rule for the damage it could lead to in the future.
“This is how the left always operates. This is just the first step. If we let this continue, the left will use ESG investing to push non-compliant companies out of the marketplace,” explained North Carolina representative Virginia Foxx on the House floor Tuesday.
The congressional effort to cripple the ESG movement is complemented by efforts in the states.
Florida has introduced legislation to address the issue.
“ESG provides a pretext for CEOs to use shareholder assets to target issues like reducing the use of fossil fuels and restricting Second Amendment rights,” explained Florida governor Ron DeSantis in his new book.