House Financial Services Committee members plan legislation on ESG and ERISA-governed pension plans (2022)

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December 20, 2022

Over at the House Financial Services Committee, congressmen Andy Barr (R-Ky.) and Mike Braun (R-Ind.) have already launched an effort to address one of the issues at the heart of the intersection of the federal government with ESG-world, namely the question of ESG usage in ERISA (the Employee Retirement Income Security Act of 1974)-governed retirement plans.

In 2020, the Trump Administration’s Department of Labor issued a rule limiting the use of ESG factors in ERISA-governed plans and only allowed such considerations if investment managers needed to decide between otherwise equally financially sound investments. Early in the Biden presidency, that rule was overturned and replaced by an ESG-friendly rule. Barr and Braun have introduced legislation to oppose the Biden Labor Department’s rule:

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Driving the news: Sen. Mike Braun (R-Ind.) and Rep. Andy Barr (R-Ky.) are attempting to dismantle a recent Department of Labor rule allowing retirement plan fiduciaries to consider climate change and other environmental, social and governance (ESG) factors in their investment actions. That DOL rule, issued on Nov. 22, followed an executive order signed by President Biden in May 2021 that directed federal agencies to consider ESG policies. Braun and Barr are introducing a joint Congressional Review Act measure that would nullify the DOL rule and prevent future, similar rules from taking effect. Be smart: The CRA legislation won't pass in a divided Congress, or with President Biden in office, but is designed to raise the issue's profile and force lawmakers to go on the record about where they stand. "By finalizing rule-making allowing plan fiduciaries to consider ESG factors, Biden’s Department of Labor is steering capital away from the American energy sector, discriminating against oil and gas producers, driving up prices at the pump, and preventing investors from reaping returns from high-performing energy stocks," Barr told Axios. What they're saying: The move is already gaining support from conservative groups eager to sink their teeth into the ESG fight. "Taking on Biden for attempting to make it easier for companies like BlackRock to put politics ahead of profits is only the beginning of what will be an ongoing effort to bring to light and take action against ESG, the biggest racket happening in America today," Will Hild, executive director of the conservative Consumers' Research Group, told Axios. Between the lines: In a wide-ranging interview on Thursday, Barr — who will be a senior member of the House Financial Services committee in the new House GOP majority next year — dove into some of Republicans' anti-ESG plans. "We're going to have a very fulsome agenda combatting ESG, highlighting ESG for the fraud that it is," Barr said, calling the climate-focused approach "a cancer within our capital markets." Barr said there will be two phases of oversight — one focused on regulators, including bank regulators, the Federal Reserve and the Securities and Exchange Commission; and the second targeting the private sector, including banks and asset managers — paired with a legislative agenda. Barr explained his philosophy is that these ESG policies are not a market-driven phenomenon, which is the opposite of how firms like BlackRock and Vanguard describe them.

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• Environmental, social, and corporate governance (ESG)
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