Biden Promises Veto of Anti-ESG Measure
March 6, 2023
President Biden is expected to soon issue the first veto of his administration.
Background. As covered in previous CREFC Policy and Capital Markets Briefings, the Department of Labor rule that allows ERISA plan fiduciaries to consider ESG factors in their investment analysis has been the target of GOP policymakers’ push against “woke capitalism.”
On March 1, the Senate voted to support a House resolution that would prohibit the DOL from continuing to enforce this rule. Democratic Senators Joe Manchin (WV) and John Tester (MO) joined GOP colleagues in support of the resolution. The President has promised to veto the bill.
The Administration’s position. The current DOL rule unwound a Trump administration policy where ERISA plans could only consider financial factors. The revised regulations do not require ESG considerations; but allow these factors to be part of a fiduciary’s risk-return analysis.
Why does this matter? The financial sector continues to be the focus of ESG politics. Several red states have passed, or are seeking to pass, bills that would prevent the investment of state funds with banks or asset managers that are considered to be “woke.” BlackRock, for example, has been the target of some of these state-level actions.
But are we seeing an “anti anti-ESG” backlash? Some market experts believe we might be at peak “anti-ESG” sentiment. New studies demonstrate that divesting from “woke” funds could cost taxpayers billions of dollars in sub-market returns. Additionally, a few conservative states, including North Dakota and Wyoming, have started pushing back against divestment bills.
CREFC is closely monitoring the ESG policy landscape. Please contact sburki@crefc.org for more information or if you would like to join CREFC’s Sustainability Initiative.