House approves measure targeting Biden rule allowing money managers to consider ESG in retirement investing

The House on Tuesday approved a resolution that would repeal a Biden administration rule for retirement investments, marking the latest flashpoint in Republicans’ crusade against environmental, social and governance (ESG) investing. 

The Congressional Review Act (CRA) resolution was approved 216-204, with Rep. Jared Golden (Maine) as the only Democrat voting with Republicans in favor of the measure.

But while a Democratically controlled Senate and White House mean that the measure is unlikely to amount to more than messaging, it is part of a broader Republican effort to oppose ESG investing.

Rep. Michael Burgess (R-Texas) in a floor speech on Tuesday characterized the regulation as being part of a “woke ESG agenda.”

“Democrats and their radical environmental NGO allies will continue to work in the shadows, strong-arming and intimidating corporations and investors alike, using any means necessary, to conscript the life savings of pensioners and retirees to implement a dangerous … investment strategy,”  Burgess said. 

The Biden rule Republicans are seeking to repeal clarifies that money managers can weigh climate change and other ESG factors when they make investment decisions. 

ESG is a broad term for attempts to invest in an environmentally conscious or otherwise ethically manner. Proponents argue this type of investing allows people to do well for themselves while also doing good for the world, and also contend that it could mitigate some of the financial risks caused by climate change. 

But many Republicans argue that ESG investing could harm the fossil fuel industry — and that consideration of additional factors by money managers could come at the expense of profits.

The Trump administration previously imposed a rule that said money managers could only make investments based on financial considerations. 

But critics said that rule was confusing, and the Biden administration contends in its rule that its predecessor discouraged managers’ consideration of ESG factors “even in cases where it is in the financial interest of plans to take such considerations into account.”

“The Trump rule, it’s extremely convoluted and just confusing,” said Andrew Behar, CEO of As You Sow, a group that seeks to use shareholder power to push action on climate and environmental issues. 

Democrats on Tuesday blasted the resolution, saying that Republicans were trying to circumvent the free market by putting up barriers to ESG investing. 

“Retirement plan fiduciaries should be free to consider climate change and other ESG factors without regulatory barriers or the threat of litigation,” Reps. Sean Casten (D-Ill.) and Juan Vargas (D-Calif.), co-chairs of the Congressional Sustainable Investment Caucus, said in a joint statement. 

“This CRA resolution is the latest dangerous move in Republican’s anti-worker and anti-free market agenda,” they added. 

The CRA, the tool Republicans are trying to use to undo the rule, may only be used on recent rules. Since most presidents’ are unlikely to reverse the actions of their own administrations, it has been most successfully used to reverse regulations after a change in administration. 

Updated at 6:09 p.m.