President Biden has vetoed a Republican-backed measure that would overturn a regulation that allows retirement-plan managers to consider climate change in their investment decisions.
The bill would have overturned a Biden administration regulation on environmental, social and corporate governance guidelines, or ESG.
The bill passed the GOP-led House on February 28 with a vote of 216 -- 204, with one Democrat joining with Republicans in support. The Senate on March 1 approved a companion measure on a vote of 50 -- 46, helped by the support of two moderate Democrats from Republican-leaning states, West Virginia Sen. Joe Manchin and Montana Sen. Jon Tester.
The Labor Department rule in question was targeted by Republican lawmakers with a legislative tool known as the Congressional Review Act. It allows lawmakers to overturn a regulation on an expedited schedule with a simple majority vote in both houses of Congress.
Guidelines regarding ESG have been targeted by conservatives who claim they are part of an effort by progressives to promote woke capitalism. ESG is another factor for managers to consider when making investments, according to the defenders of the regulation.
This bill would risk retirement savings by making it illegal to consider risk factors that MAGA House Republicans don't like, Mr. Biden said.
The veto would not be overridden in the narrowly divided Congress because it would require a two-thirds majority in both chambers. Democrats control 51 seats in the Senate.
Mr. Biden's first veto came at a similar point in his presidency as that of former President Donald Trump, who issued his first veto in March 2019 over a resolution that would have prevented him from funding a wall along the U.S. southern border without congressional approval.
Presidential vetoes have become less common in recent administrations. Presidents George W. Bush, Barack Obama, and Donald Trump have issued fewer vetoes during their administrations, according to the American Presidency Project at the University of California, Santa Barbara. The former Presidents Bill Clinton and George H.W. were in contrast. More than three dozen vetoes were issued by Bush.
In his State of the Union address and speeches around the country, Mr. Biden said he is prepared to deploy his veto pen if Republicans seek cuts to Medicare or Social Security or measures to reduce the cost of prescription drugs.
His first veto stemmed from an issue that was more obscure. In November, the Labor Department drafted a rule under the Employee Retirement Income Security Act allowing fiduciaries to consider climate change and ESG factors as they invested in privately held retirement plans. ESG factors have become commonplace in the finance world as hedge funds and investment firms have tried to address climate change and environmental impacts.
The Republicans have targeted investments in the past, calling them irresponsible and part of a progressive agenda. Proponents of the bill said fund managers should focus on investment returns rather than be driven by factors they think are political.
Biden is doubling down on the priority of a progressive agenda over Americans retirements and the will of Congress. Sen. Mike Braun R. Ind said he had good luck explaining this one. He said that the ESG rule allows investment managers to push a political agenda at the cost of retirement savers who receive the best rate of return.
The matter was viewed by Democrats as an issue of empowering Americans to make investment decisions.
Retirement plan fiduciaries should be able to consider any factor that maximizes financial returns for retirees across the country. That is not controversial - that is common sense, Mr. Biden said in his veto statement.