September 19, 2024 - Pensions & Investments
By Brian Croce
The House passed a bill package to bar retirement plan fiduciaries from considering environmental, social and governance factors when making investment decisions.
The 217-206 vote on Sept. 18 was largely along party lines, with three Democrats joining Republicans in approving the Protecting Americans’ Investments from Woke Policies Act.
With just a few months left in the congressional session and Democratic control of the Senate and White House, the bill is unlikely to progress further.
Rep. Rick Allen, R-Ga., originally introduced the Roll Back ESG to Increase Retirement Earnings Act, or RETIRE Act, earlier this month.
That bill, which was part of the package passed Sept. 18, calls for reverting back to a Trump-era Department of Labor rule that stipulated that ERISA plan fiduciaries cannot invest in "non-pecuniary" vehicles that sacrifice investment returns or take on additional risk.
The Biden administration in January 2021 said it would not enforce the Trump-era rule and later promulgated its own rule, which took effect in January 2023. That rule allows ERISA fiduciaries to consider ESG factors while maintaining the department's position that fiduciaries may not sacrifice investment returns or assume greater investment risks as a means of promoting collateral social policy goals.
Current DOL officials said the Trump-era rule had a "chilling effect” on retirement plan fiduciaries considering ESG factors, so a new rule was needed.
The Biden rule is being challenged in court by Republican attorneys general and others.
"By empowering financial advisers to invest retirement savings in risky, climate-related ESG funds, the Biden-Harris Administration is hijacking Americans' hard-earned money in favor of their widely unpopular rush-to-green agenda,” Allen said in a statement following the bill’s passage.
The House-passed package also includes the Retirement Proxy Protection Act, introduced by Rep. Erin Houchin, R-Ind., that would codify another Trump-era rule stipulating that when an ERISA fiduciary decides to cast a proxy vote it must do so solely in the interest of plan participants.
Additionally, the package includes the No Discrimination In My Benefits Act, introduced by Rep. Bob Good, R-Va., that declares that race, color, religion, sex, or national origin may not be taken into consideration when selecting a fiduciary, counsel, employee, or service provider of an ERISA plan.
Lastly, the Providing Complete Information to Retirement Investors Act, introduced by Rep. Jim Banks, R-Ind., would implement a notice requirement on defined contribution plans explaining the difference between choosing from investments selected by ERISA fiduciaries and choosing from investments through a brokerage window.
Rep. Bobby Scott, D-Va., ranking member on the House Education and the Workforce Committee, opposed the bill and said in a speech before the vote that ESG is a sound, profit-centered risk mitigation strategy widely used by financial professionals.
The bill passed Sept. 18 “takes us backwards and undercuts the retirement professionals who are legally bound to make prudent decisions for workers and retirees,” Scott said.