Retirement funds are ground zero in Senate GOP opposition to ESG options
WASHINGTON — Senate Republicans are teaming up to curb retirement plan sponsors’ ability to consider environmental, social and governance factors in selecting investments, as a counter to the Biden administration’s efforts to expand worker and retiree access to such investing.
Sen. Mike Braun, R-ind., this week unveiled a bill that would specify the fiduciary duty of plan administrators is to select and maintain investments based solely on monetary factors under 1974 legislation known as the Employee Retirement Income Security Act, a law that governs a broad range of retirement and health benefit plans.
If plan sponsors want to consider nonpecuniary factors when choosing between funds, they could do so only if they are unable to distinguish them “on the basis of pecuniary factors alone,” according to the bill text. Even if an ESG investment choice is able to meet that standard, plan advisers would also have to make lengthy justifications to include it.
The bill essentially would reinstate a Trump administration Labor Department rule that took away retirement plan sponsors’ ability to direct investments into ESG options.
The bill is also similar to recent legislation from Sen. Steve Daines of Montana, who joined Braun’s bill as a co-sponsor, as did Sens. Richard M. Burr of North Carolina, Tommy Tuberville of Alabama, Cynthia Lummis of Wyoming, Roger Marshall of Kansas, Roger Wicker of Mississippi and James M. Inhofe of Oklahoma.
“This bill protects investors by ensuring investment managers only consider financial risk and return when investing on behalf of Americans saving for retirement,” Tuberville said in a statement Tuesday. “It’s my hope that Americans, who are already struggling with inflation’s negative impact on their investment accounts, will be protected from fiduciaries investing their money in ways that are not financially beneficial to them.”
The legislation marks the GOP members’ latest attack on the ESG movement. In recent months they have ratcheted up criticism that ESG considerations such as climate risk are politically based and immaterial. Any regulations to encourage their inclusion are inappropriate, they say.
SIGNAL OF REPUBLICAN PLANS
House Republicans tried to use a six-bill fiscal 2023 spending package to derail the Securities and Exchange Commission’s proposed climate risk disclosure rule through amendments in the Financial Services portion. But Democrats rejected that effort.
While Braun’s legislation and similar bills are unlikely to advance with Democrats in charge, it may foreshadow what’s to come if Republicans take control of either chamber of Congress after the midterm elections this fall.