The Senate approved a resolution on Wednesday that aims to reverse a Biden administration rule on environmental, social and governance (ESG) investing, setting up what could be the first veto of Biden’s presidency.
The Senate voted 50-46 to block the ESG rule, with a small number of Democrats joining Republicans in opposing the Biden administration policy.
In general, ESG refers to efforts to invest in an environmentally-conscious or otherwise ethical way. The rule in question clarifies that money managers can weigh climate change and other ESG factors when they make decisions for retirement investments. It replaces a Trump-era rule that the Biden administration says discouraged consideration of ESG factors “even in cases where it is in the financial interest of plans to take such considerations into account.”
Sen. Joe Manchin (D-W.Va.), one of the few Democrats who voted to nix the Biden rule, described it as “another example of how our administration prioritizes a liberal policy agenda over protecting and growing the retirement accounts of 150 million Americans.” Manchin, if he decides to run again, is expected to race a tough reelection fight next year.
Fellow red-state Democrat Sen. John Tester (D-Mont.), who is seeking reelection in 2024, was also expected to vote to get rid of the rule.
The White House argues that the rule simply allows for relevant factors to come under consideration in investment decision making.
“The rule simply makes sure that retirement plan fiduciaries must engage in a risk and return analysis of their investment decisions and recognizes that these factors can be relevant to that analysis,” said a White House statement outlining the impending veto.
The statement continued to say that if the Labor Department were to return to the Trump-era rule, “the federal government would be interfering with the market in a manner that stands in the way of retirement plan fiduciaries’ ability to protect these hard-earned retirement savings and pensions.”
And while the resolution garnered at least some Democratic support, it is part of a larger GOP effort to oppose ESG investing.
Supporters of ESG say that following these principles allows people to make money, have a positive impact on the world around them and avoid some financial risks caused by climate change.
Opponents of such efforts say that such considerations could take away from maximizing profits and also critique it on the grounds of negative impacts to industries like fossil fuels.
Source: The Hill