Sen. Bill Cassidy, Republican of Louisiana, on Thursday introduced a bill that would override a Biden-Harris administration rule that allowed retirement funds to consider factors such as racial justice and climate change when making investments. We plan to do so.
The bill would require retirement funds to make investment decisions solely based on “financial factors,” meaning they only consider considerations in terms of their “material impact on the risk or return of the investment.” This would effectively prohibit any impact on environmental or social issues. Governance (ESG) investing, according to a copy of the document obtained exclusively by the Daily Caller News Foundation. ESG is a framework that argues that investments should be made in a way that prioritizes ideological commitments such as environmental protection and social equity in addition to profitability, rather than just profitability.
Cassidy, ranking member of the Senate Health, Education, Labor, and Pensions Committee, said, “Wealth management companies should not invest their clients' money into left-wing political ideologies, but rather help Americans earn the best possible retirement returns.'' Our priority should be to help them achieve their goals.” , said. “This legislation protects the 152 million Americans who rely on solid retirement benefits to survive their careers.”
Current Department of Labor regulations allow administrators of employee retirement plans to consider ESG factors when selecting investment opportunities that they determine are of comparable quality. If a retirement fund determines that multiple investment options are of equal value under the Cassidy bill, it must document how it made that determination and randomly select among the options. (Related: Court orders review of Biden administration's green investment rules following landmark Supreme Court ruling)
ESG investments often prove to be volatile, and such funds often experience higher losses than traditional investment funds, which can jeopardize the long-term stability of retirement accounts. There is sex. “The fact that these funds have not performed well over the past two years is clearly discouraging to some investors,” said Hortense Bioy, global director of sustainability research at financial services firm Morningstar. say. said Financial Times.
Investors pulled $13 billion of assets out of ESG funds in 2023, the worst year on record. According to In a report published by Morningstar. 2024 could be even worse for the fund, with a record $8.8 billion leaving the fund in the first quarter of this year alone, Reuters reported.
As of September 2023, US ESG funds had assets worth a total of $315 billion. According to On CNN.
Sen. Bill Cassidy speaks with reporters outside the Senate chamber at the Capitol after the vote. (Kent Nishimura/Los Angeles Times via Getty Images)
meeting passed A similar bill was introduced last year that would also ban ESG investing in retirement funds, and Democratic West Virginia Sen. Joe Manchin at the time joined Republicans in supporting the initiative. Biden ultimately exercised the right of veto However, the law.
“An asset manager's only priority is to help Americans achieve the best returns in retirement, not to use client funds to fund political agendas,” Cassidy said. he said at the time. “By vetoing this bipartisan resolution, President Biden is putting the retirements of 152 million Americans at risk.”
The White House did not respond to a DCNF question about whether Biden would veto any new effort to ban ESG investing in retirement funds.
Even if Cassidy's recent efforts to challenge the Biden-Harris administration's ESG investment rules fail, the 5th Circuit Court of Appeals in July reconsidered a Texas judge's decision to uphold ESG regulations. There is still a possibility that it will be rejected in court, as the court has ruled that it must be done. He relied on a legal doctrine called Chevron deference, which the Supreme Court overturned in June.
“ESG is creating an uncontrollable urge to pressure companies to solve complex global and societal problems,” Utah State Treasurer Marlo Oakes said. said In a statement to the House Ways and Means Committee in November 2023, it mentioned ESG investing. “These issues, such as climate, income inequality, guns, and abortion, to name just a few, should be within the purview of democratically elected governments. promoting ideological goals that are at odds with and often detrimental to shareholder value.”
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