Biden administration rule allows plan managers to incorporate ESG positions

Biden administration rule allows plan managers to incorporate ESG positions

Retirement plan managers will be able to factor in ESG positions as a company's environmental, social, and governing ESG positions as a Biden administration rule goes into effect on Monday, despite the objections of 25 Republican-led states.

The Department of Labor rule, first announced in November, reverses restrictions put in place under the Trump administration. It is now facing a lawsuit from Utah and two-dozen other states, who argue that it is a violation of the Employee Retirement Income Security Act ERISA of 1974, which states retirement plan assets must be held for the sole purpose of providing benefits to participants in the plan, and that fiduciaries must act solely in the participants' interests. The GOP-led states claim that plan managers will compromise the growth potential of participants' accounts by focusing on social and political agendas.

The rule must be stopped because of the fact that asset managers are permitted to direct hard-working Americans money to ESG investments, which puts trillions of dollars of retirement savings at risk in exchange for someone else's political agenda, said Utah Attorney General Sean Reyes, who spokeswoman for FOX Business last week. The lawsuit was filed in federal court in Texas on Thursday. The court has yet to make a decision on the request for an injunction. If granted, the rule would be blocked for the duration of the case, depending on any subsequent appeal.

Over the past few years, major asset managers and financial institutions have focused more on prioritizing ESG factors when making key investment decisions. They have set their sights on investing in companies based on their efforts to combat climate change and curb their carbon footprints.

Companies like BlackRock, State Street, and Vanguard, which collectively manage trillions of dollars in assets, have taken lead roles in the ESG movement. In response to the growing movement, Republican State Attorneys General and Financial Officers fought back, cancelling contracts with firms and threatening legal action over how they handle customers' investments.

In November, Labor Secretary Marty Walsh said the new rule would help plan participants make the most of their retirement benefits. The Republicans believe that it does more to advance the Biden administration's green agenda than to help investors handle retirement savings.

The rule is an affront to every American concerned about their retirement account, Texas Attorney General Ken Paxton said in a statement to FOX Business. The Biden Administration's decision to risk the financial security of working-class Americans in order to advance a woke political agenda is insulting and illegal.