Biden Vetoes Attempt to Overturn ESG Rule
On March 20, President Joe Biden vetoed the US Senate’s vote to overturn the Environmental, Social, and Governance (ESG) rule, which allows retirement plan fiduciaries to consider ESG factors when selecting investments.
The Senate’s vote followed the US House of Representatives’ approval of an identical resolution on February 28.
The rule is firmly opposed by Republican lawmakers and state attorneys general. In late January, 25 states filed a lawsuit against the Biden administration, alleging that the ESG rule does not align with the Employee Retirement Income Security Act (ERISA) mandate, which covers approximately 2.5 million health plans, 747,000 retirement plans, and 673,000 other welfare benefit plans. ERISA requires fiduciaries of retirement plans to act solely in the best interests of their beneficiaries.
Opponents of the ESG rule argue that it imposes undue burdens on fiduciaries and may result in suboptimal investment decisions. They contend that the rule’s focus on ESG factors may cause fiduciaries to prioritize environmental and social concerns over the financial well-being of plan beneficiaries.
The ESG rule aims to look beyond profit and loss to determine whether to make an investment. This lack of clarity makes it a rather controversial rule. As Joe McGowan says, writing in Forbes, “Conservatives, rightfully or wrongly, believe that ESG has become a tool for outside interests to impose their beliefs on private companies. Not just environmental concerns, but also political debates…. This has become a significant concern within the business sector, hence the congressional override by Republicans.”
In any case, overriding the president’s veto is unlikely, as it would require a two-thirds majority in both chambers of Congress. However, even though the ERISA rule is going to stand for now, its implementation remains problematic, as the Department of Labor deals with how to write up clear guidelines on its implementation and the states continue to fight it.
This Just In ... Biden's Proposed Federal Paid Family Leave Program Likely to Face Challenges
Tripledemic Presents More Challenges for Employers
Harnessing AI and Data Science to Revolutionize Workplace Safety
How to Provide Benefits Equitably for Both Remote and Onsite Employees
Biden Vetoes Attempt to Overturn ESG Rule
The information presented and conclusions within are based upon our best judgment and analysis. It is not guaranteed information and does not necessarily reflect all available data. Web addresses are current at time of publication but subject to change. SmartsPro Marketing and The Insurance 411 do not engage in the solicitation, sale or management of securities or investments, nor does it make any recommendations on securities or investments. This material may not be quoted or reproduced in any form without publisher's permission. All rights reserved. ©2023 Smarts Publishing https://smartspublishing.com/ Tel. 877-762-7877.