Washinton D.C. – Senator Katie Britt (R-Ala.) and a bipartisan group of 49 additional Senators today voted to overturn the Biden Administration’s ESG rule which endangers the retirement investments of 152 million Americans by prioritizing political causes over the best financial returns.
Under the Congressional Review Act (CRA), the Senate voted to block the rule in a 50-46 vote. An identical disapproval resolution passed in the House yesterday in a 216-204 vote. With Senate passage, the resolution now heads to the desk of President Joe Biden, who has vowed to veto the measure.
“Today, I proudly voted to protect the hardworking Americans and retirees who are already being crushed by generationally high inflation fueled by the Biden Administration’s wasteful tax-and-spend spree and reckless Green New Deal agenda,” said Senator Katie Britt. “The simple fact of the matter is that inflation is up 14.4% since President Biden took office, and retirees lost 23% of their 401(k) savings last year alone. The last thing Alabama families can afford right now is their hard-earned retirement savings funding someone else’s political agenda instead of their own future. Fiduciaries should put the financial wellbeing of their investors first, not politics. And it is past time for President Biden to put hardworking American families first instead of his own reckless political agenda.”
In November, the Biden Administration’s Department of Labor instituted a rule that explicitly permits ERISA retirement plan fiduciaries to consider environmental, social, and corporate governance (ESG) factors when selecting investments and exercising shareholder rights.
This Biden Administration decree replaces a previous rule which mandated fiduciary decisions be made solely on getting the best returns for the 152 million American workers that depend upon ERISA for their retirement. Because ERISA covers most employer-sponsored retirement plans, we’re talking about $11.7 trillion in assets here.
Under this rule, retirement fund managers could prioritize ESG factors instead of financial returns in their investment decisions for workers’ hard-earned savings. Plan participants could unknowingly be enrolled in ESG funds, which may not align with their political views. In the most recent survey, most Americans think it’s a bad idea for companies to use their financial influence to advance a political or social agenda, as is the case in ESG investing.
A number of studies have shown that ESG investing policies have worse rates of return. For example, a study by UCLA and NYU found that over the past five years, ESG funds underperformed the broader market, averaging a 6.3% return compared to an 8.9% return, respectively. Additionally, in comparison to other investment plans, ESG investors generally end up paying higher costs for worse performance.