The House of Representatives voted Tuesday to kill the Biden administration’s contentious rule encouraging fiduciaries from private retirement plans to consider environmental, social, and governance (ESG) factors when deciding which investment decisions to carry out for tens of millions of Americans.
Republicans broadly see the rule of the Department of Labor as a crucial part of President Joe Biden’s administration’s push to instill “woke” ideology into all aspects of government. Within the rule, fiduciaries who make investment decisions for investors’ retirement plans involving more than 150 million people would be allowed under federal guidelines to consider the approach of companies to social issues instead of concentrating on return on investment and profitability for retirees.
Members of the GOP say the administration’s push for ‘woke’ rules is a recipe for destroying millions of investment accounts. On Tuesday, House Republican leaders introduced a resolution to kill the rule. The resolution passed 216-204, with only one Democrat voting for it.
During the floor debate, Democrats argued that the Labor Department’s rule would allow retirement plan managers to direct investments to companies that could stick to ESG standards now. Therefore, they would become more profitable in the long run, even if they lose profits today.
“Consideration of ESG factors is not at odds with making a profit,” said Democrat Representative Bobby Scott of Virginia. “But if a company has negative externalities, such as carbon-intensive business practices, vulnerability to sea-level rise, high liability risks or a record of mistreating workers who may go on strike, its stock could suffer in the long term.”
According to California Democrat Representative Mark DeSaulnier, the Labor Department rule is “a recognition that if a company is inherently risky because of the business they do on their internal practices, its stock could suffer in the long run.”
Republicans believe the rule is a form of pressure from Washington
However, several Republicans rejected that analysis and remarked that the rule is a form of pressure from Washington to align with the consensus view of Democrats and adopt ESG.
“The left is using ESG investment criteria as a political tool to cudgel companies into accepting leftist policies,” said GOP Representative Virginia Foxx of North Carolina. “This is how the left always operates. This is just the final step. If we let this continue, the left will use ESG investing to push non-compliant companies out of the marketplace.”
“It is unacceptable to encourage fiduciaries to sacrifice the savings of Americans to the orthodoxy of the woke left,” she continued.
Representative Glenn Grothman, R-Wis., echoed Foxx, saying, “This is an ideological push on corporations. This is to further push down on them and say, ‘Here you are, Mr. Big Corporation, we’ll give you a nice pat on the back if we use all of your stockholders’ money to promote a political agenda.’”
“It’s this pound, pound, pound that we already get from universities, we already get from the popular culture in Hollywood, now we’ve got to get it from big business,” said Grothman.
GOP Representative Bob Good of Virginia said the rule is only targeted at supporting the “phony climate movement” and added that if ESG stocks’ performance improved, “They would get those investment dollars anyway without this new rule.”
House passage of the disapproval resolution then left it up to the Senate. When the resolution came to the floor of the Senate Wednesday, it was defeated by a vote of 50-46 in a stunning rebuke to the Biden Administration, effectively killing ESG rule.
However, the defeat in the Senate does not mark an end to the rule. Monday night, the White House said President Joe Biden would veto the resolution when it reaches his desk.
If that were to occur, the Senate and House would require a two-thirds majority vote to overturn Biden’s veto. Today’s House vote shows that a majority of two-thirds probably cannot be reached given the broad support of the Labor Department rule from Democrats.
