Congress Rejects ESG Investment Regulation; Biden Promises Veto

Last week, Congress took action to reverse a Biden administration regulation that pushes a left-wing agenda in regard to retirement plan investments.

On December 1, 2022, the U.S. Department of Labor finalized a regulation relating to “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights” (87 Fed. Reg. 73822). According to Fox News, this regulation allows “fiduciaries who make investment decisions for the retirement plans of more than 150 million people [to] consider companies’ approach to climate change and other social issues, instead of focusing on only profitability and return on investment for retirees.” In other words, the regulation allows for environmental, social, and governance (ESG) investing, which (according to Investopedia) “refers to a set of standards for a company’s behavior used by socially conscious investors to screen potential investments.” Among other left-wing priorities, ESG investors take into account companies’ policies and stances regarding abortion, homosexuality, and transgenderism. Conservatives take the view that ESG investing places workers’ retirement plans at unreasonable risk by causing investment profitability to take a backseat to the left’s political and social investment priorities. “‘The left is using ESG investment criteria as a political tool to cudgel companies into accepting leftist policies,’ said Rep. Virginia Foxx, R-N.C. ‘This is how the left always operates. This is just the first 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.’”

Under the Congressional Review Act, Congress can overturn a federal agency’s regulation if the House and the Senate each pass a resolution of disapproval by a simple majority vote. Accordingly, opponents of the ESG regulation introduced H.J.Res.30. On February 28, 2023, the U.S. House of Representatives voted 216-204 to pass the resolution. One Democrat and 215 Republicans voted in favor of the resolution, while 204 Democrats voted against it. All Republican members of New York’s congressional delegation supported the resolution, and all New York Democrats opposed it. The following day, the U.S. Senate passed the resolution, 50-46. Two Senate Democrats joined 48 Senate Republicans in supporting the measure, while Sen. Chuck Schumer (D-NY), Sen. Kirsten Gillibrand (D-NY), and 44 other Senate Democrats opposed it.

While President Joe Biden has promised to veto H.J.Res.30, and while supporters of the resolution are far short of having the two-thirds majority necessary to override a presidential veto, New Yorkers for Constitutional Freedoms applauds this bipartisan effort to discourage ESG investing. The passage of this resolution has made it necessary for members of Congress to take public positions on this important issue. It is hoped that the pending legal challenge to the ESG regulation will be successful.