The Senate voted on Wednesday to upend the Biden administration's rule allowing retirement plan managers to consider environmental, social, and corporate governance (ESG) factors in their investments. The resolution puts a stop to a rule issued by the Department of Labor that would have allowed retirement plans to consider climate change, human rights, and other non-financial factors when making investments.
The Senate's vote marks the latest development in a long-running battle over whether retirement plans should be allowed to factor environmental and social considerations into their investment decisions. The rule issued by the Biden administration sought to address concerns that these issues had been overlooked in the past. But opponents argued that the rule would lead to a significant increase in compliance costs and potentially lower returns for investors.
The House had previously approved a resolution that would have repealed the Biden administration's rule. The Senate's vote on Wednesday now puts the issue back in the hands of President Biden, who could veto the resolution.
The Biden administration's rule was seen as a major victory for the environmental, social and governance (ESG) investment community. Proponents of ESG investing argue that it can lead to better long-term returns for investors and help address systemic issues like climate change. But opponents argue that ESG investing can lead to higher costs and potentially lower returns for investors.
The Department of Labor's rule would have required retirement plan managers to consider environmental, social and corporate governance factors when selecting investments. The rule would have required managers to consider factors like a company's greenhouse gas emissions, diversity, equal pay and human rights records when making investments.
The debate over ESG investing has become increasingly politicized in recent years. Supporters of the Biden administration's rule argued that it was necessary to address the long-term risks that the climate crisis presents to investors. But opponents argued that the rule would be too burdensome and could potentially disadvantage investors who are not knowledgeable about ESG investing.
The Senate's vote on Wednesday to block the Biden administration's retirement investment rule comes as the Biden administration is pushing for more aggressive action on climate change. President Biden has proposed a sweeping plan to reduce greenhouse gas emissions, invest in green infrastructure and transition the US economy to clean energy sources. The Biden administration has also proposed a series of executive orders to address the climate crisis, including rules that would require companies to disclose their climate risks to investors.
The issue of ESG investing has become increasingly important as investors seek to understand the long-term risks associated with climate change. The Biden administration's rule sought to address these concerns and give investors more options when it comes to investing for the long-term. But the Senate's vote on Wednesday indicates that the rule may not be implemented as soon as originally planned.