The House of Representatives voted along party lines Tuesday to block a Labor Department rule that would allow retirement plan managers to consider political objectives when making investments.
The Biden administration submitted the rule, which would allow managers to consider environmental, social and governance (ESG) factors when investing retirement savings, in November 2022. Previously, plan managers could only consider fiduciary factors. The Congressional Review Act allows Congress to block executive orders and guidance by a simple majority vote in both chambers, although the votes are subject to a presidential veto.
All 216 voting Republicans supported the resolution, introduced by Kentucky Rep. Andy Barr, while all 205 voting Democrats opposed it. Six Republicans and seven Democrats missed the vote.
Americans don’t want their retirement accounts politicized. Today, @HouseRepublicans will pass my legislation blocking the Admin’s regulation enabling employer-sponsored retirement plans to put politics ahead of maximizing financial security for investors. pic.twitter.com/AyF8x2wEXc
— Rep. Andy Barr (@RepAndyBarr) February 28, 2023
Republican Indiana Sen. Mike Braun introduced companion legislation in the upper chamber. With the support of West Virginia Democrat Joe Manchin, the resolution is expected to pass, and could lead to the first veto of Joe Biden’s presidency. (RELATED: Republicans Plot Legislative Avalanche Targeting Progressive Big Biz)
“While some of my friends on the other side of the aisle argue that ESG investing is actually driven by investors themselves, not ideologues at asset management firms or in the White House who want to push their environmental or social causes at the expense of retail investors, a 2021 study conducted by the University of Chicago and FINRA proves investors largely do not care. Twenty-one percent of investors don’t even know what ESG stands for. Is that popular? Is that what popular ESG is? And this neutrality nonsense. Look, nobody’s saying you can’t invest based on your values. But this bill would steer people unwittingly into these funds and the status quo does not deny people to invest based on their values. It just says that the default has to be to maximize returns,” Barr said in a floor speech.
Several studies have shown that funds employing ESG principles generate lower returns than those that do not. ESG funds dropped 18% in the year-to-date ending in November 2022, while all other funds dropped 15.8% over the same time period, according to Reuters. Institutional asset management firm BlackRock, which famously pivoted to ESG, lost $1.7 trillion over the first half of 2022, more than any other firm over the time period.