Asset managers would be prohibited from prioritizing environmental, social, and governance (ESG) factors over the financial success of Americans’ retirement savings under a new bill introduced in Congress.
“Asset managers should prioritize helping Americans achieve the best return for their retirement, not funneling their clients’ money to fund a left-wing political ideology,” said bill sponsor U.S. Sen. Bill Cassidy (R-LA). “This legislation protects 152 million Americans who depend on a strong retirement to live after their career is over.”
In 2022, the U.S. Department of Labor (DOL) issued a rule that allows asset managers to prioritize ESG factors when choosing investments on behalf of their clients, even if the investments result in reduced financial returns.
If enacted, the Restoring Integrity in Fiduciary Duty Act, S. 5174, which Cassidy introduced on Sept. 25, specifically would amend the Employee Retirement Income Security Act of 1974 to clarify the criteria by which fiduciary responsibility is exercised in protecting shareholder rights.
More than a dozen Republicans, including Cassidy, previously said that ESG factors can only be considered if they are appropriate for retirement savings and are in the best interest of plan participants, and cannot be considered solely for ancillary political or social reasons.
“A 2022 Biden DOL rule, entitled Prudence and Loyalty in Selecting Plan Investments and Analyzing Shareholder Rights, empowered fiduciaries to consider ESG factors in their risk-return analysis of potential investments and use impact issues as a “tie-breaker” when choosing between equally competitive funds,” the lawmakers wrote in a Dec. 5, 2023 letter sent to the DOL.
The rule, they added, may allow activist university trustees to target Israel and companies doing business with Israel, thereby politicizing the retirement savings of the nation’s educators.
“The American people must be confident that pension investors will not override the economic goals, or personal views, of beneficiaries to pursue their own political agenda,” wrote the GOP senators.