The move targets major asset managers to regularly use criteria they believe are essential for building a portfolio that can withstand changes, especially climate change, in the coming years. These criteria are known as ESG – environmental, social and governance – and have become sensitive political and cultural touchstones, with critics calling them evidence of “awakened” financial institutions.
Manchin defended his vote, calling ESG “an example of how our Administration is prioritizing a liberal policy agenda to protect and grow the retirement accounts of 150 million Americans.” He said the White House continues to “politicize the American people’s 401(k)s.”
Tester posted a statement on his webpage saying “we need to focus on making sure Montanans’ retirement savings are as strong as possible.” He said, “I oppose this rule by the Biden administration because I believe it harms retirement accounts for working Montanans and is wrong for my state.”
Both lawmakers are from states whose economies are heavily dependent on fossil fuels.
Senate Majority Leader Charles E. Schumer (DN.Y.) criticized Republicans for seeking to eliminate the Labor Department rule, which is voluntary and does not require fund managers to do anything.
“Republicans talk about their love of free markets, small government [and] allowing the private sector to do their job,” Schumer said. “But their obsession with eliminating ESG does the opposite, forcing their own views down the throats of every company and investor.”
Senate Minority Leader Mitch McConnell (R-Ky.) said Tuesday that the “Biden administration wants to allow Wall Street to use hard-earned savings to advance left-wing political initiatives.” wings.”
The bill falls under the Congressional Review Act, which allows Congress to reinstate rules issued by a federal agency if the rule has not been in effect for more than 60 legislative days. This comes against a backdrop of state-level officials attempting to block the use of ESG by state pension managers and investors in state and municipal bond offerings.
If Biden vetoes the measure, a two-thirds majority in Congress would be needed to override it. President Donald Trump vetoed 10 bills and Presidents Barack Obama and George W. Bush vetoed 12 each.
“Today’s bipartisan vote clarifies what we have been saying for a long time: The ESG is an attempt to circumvent the democratic process in order to promote an inherently political agenda,” said Derek Kreifels, the chief executive of State Financial Officers Foundation, which works with state attorneys general. and treasurers. “Any move to replace or dilute the fiduciary duty would undermine the foundations of our economic freedom and harm the American worker.”
But climate activists called the vote bad policy and bad for the environment. While large asset managers who use ESG tools are accused of violating their fiduciary obligations, asset managers respond that ESG choices are often necessary to fulfill their fiduciary obligations.
“Today, the American people have lost, and the big oil and gas lobbyists have won,” the Climate Action Campaign, a coalition of major environmental and public health groups, said in a statement. “The Senate just took a big government action that limits free market investment, further threatens our climate and environment, and jeopardizes the retirement security of millions of Americans,” the coalition wrote.
Despite the Congressional victory for ESG critics, members of state legislatures across the country, including Republican strongholds, have refused to interfere in the investment decisions of major financial institutions, in part because such restrictions cause high borrowing costs.
