The U.S. Senate on March 1 voted to overturn the month-old regulation that allows fiduciaries to consider environmental, social and corporate governance (ESG) factors when choosing retirement investments.
The resolution will head to President Joe Biden, who earlier this week promised he would veto any bill that nullifies the ESG rule.
All Senate Republicans present and two Democrats on Wednesday voted for the resolution to void the Department of Labor's (DOL's) ESG rule in a 50-46 vote. On Feb. 28 in a 216-204 vote, members of the U.S. House of Representatives approved an identical resolution.
The ESG rule, which took effect Jan. 30, was finalized in November following an executive order signed by Biden in May 2021 that directed federal agencies to consider policies to protect against the threats of climate-related financial risk.
The ESG rule—Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights—permits retirement plan fiduciaries, such as 401(k) plan sponsors, to consider climate change and other ESG factors when they select investment options and exercise shareholder rights, such as proxy voting for plan-held securities. The DOL emphasized, though, that the rule allows fiduciaries to consider these factors—it does not mandate it.
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