Starting Monday, retirement plan directors will be able to transact with the company Environmental, Social and Governmental (ESG) positions when making investment decisions, as the Biden administration’s rule goes into effect — despite opposition from 25 Republican-led states.
The Labor Department law, first announced in November, mirrors restrictions imposed under the Trump administration. It is now facing a lawsuit from Utah and twenty other states, who argue it violates the Employee Income Security Act (ERISA) of 1974, which states that retirement plan assets must be held for the exclusive purpose of providing benefits to plan participants, and that the trustees must act only for the interests of the participants. GOP-led states say that by focusing on social and political agendas, plan managers will jeopardize the growth potential of participants’ accounts.
“Allowing asset managers to funnel hard-working Americans’ money into ESG investments is putting trillions of dollars in retirement savings at risk in exchange for someone else’s political agenda,” Utah Attorney General Sean Reyes told FOX Business last week. I stopped.”
The lawsuit was filed on Thursday Federal court in Texas. The court has not yet issued a ruling on the injunction request. If the rule is granted, it will be banned for the duration of the case, depending on any subsequent appeal.
25 states strike a Biden administration with a law against climate measures targeting Americans’ savings for retirement
Over the past few years, asset managers and financial institutions have increasingly focused on prioritizing environmental, social and institutional factors when making key investment decisions. They have particularly set their sights on investing in companies based on those companies’ efforts to combat climate change and reduce carbon footprints.
companies like BlackRock, State Street and Vanguard, which collectively manage billions of dollars in assets, have taken leadership roles in the ESG movement. In response to the growing movement, state Republican attorneys general and financial officials have fought back, canceling contracts with the companies and threatening legal action over how they handle clients’ investments.
TEXAS SUBPOENAS BLACKROCK FOR DOCUMENTS RELATED TO ESG PUSH
The Labor Department did not respond to Fox Business’s request for comment on the lawsuit. In November, Labor Minister Marty Walsh said the new law would “help plan participants get the most out of their retirement benefits”.
However, Republicans believe it is more to advance the Biden administration’s green agenda than to help investors do business with them retirement savings.
Click here to read more about FOX BUSINESS
“This rule is an insult to every American who cares about their retirement account,” Texas Attorney General Ken Paxton said in a statement to FOX Business. “The fact that the Biden administration is now choosing to risk the financial security of working-class Americans to advance a sober political agenda is insulting and illegal.”
Thomas Catenacci of Fox Business contributed to this report.