Sen. Shelley Moore Capito (R-WV) talks to reporters during a news conference following the weekly Senate Republican policy luncheon on the U.S. Capitol on February 28, 2023 in Washington, DC.
Chip Somodevilla | Getty Images
WASHINGTON — The Senate on Wednesday voted to overturn a Labor Department rule that allows fiduciary retirement fund managers to think about climate change, good corporate governance and other aspects when making investments on behalf of pension plan participants.
The ultimate vote within the Senate was 50-46, with two Democratic senators crossing party lines to support the repeal bill: West Virginia Sen. Joe Manchin and Montana Sen. Jon Tester. Each are up for reelection next 12 months in conservative-leaning states.
President Joe Biden said Monday that he’ll veto the Senate bill if it involves his desk — the primary veto of his presidency.
The House version of this bill passed on Tuesday with the support of each Republican and one Democrat, after which it advanced surprisingly quickly to the Senate.
Buoyed by wins in November’s midterm elections, Republicans have vowed to make use of their recent clout in Washington to take aim at “woke” capitalism — starting with an all-out assault on environmental, social, and company governance (ESG) investing policies. ESG funds are designed to draw socially conscious investors with portfolios of firms that, for instance, don’t contribute to climate change, or that practice good corporate governance.
Speaking on the Senate floor Wednesday, Majority Leader Chuck Schumer, D-NY, defended the Labor Department rule, which went into effect in November of last 12 months.
“This is not about ideological preference — it’s about taking a look at the largest picture possible for investors to attenuate risk and maximize returns,” said Schumer. “Why shouldn’t you take a look at the risks posed by increasingly volatile climate incidents?”
Democrats also noted that the Labor Department rule was voluntary, so it didn’t require fund managers to really do anything.
As a substitute, it released them from the previous rules, enacted throughout the Trump administration, which required that managers of federally governed pension funds limit their investment decisions only to what would generate the very best returns, effectively prohibiting them from considering other aspects.
Republican critics of the Labor Department’s recent rule say it undermines 401(k) retirement funds by allowing investment managers to place ideological issues like climate change ahead of investment returns.
“The last item we must always do is encourage fiduciaries to make decisions with a lower rate of return for purely ideological reasons,” Sen. Mike Braun of Indiana, the Senate’s lead sponsor of the bill, said earlier this month.
Republican House committee chairs and presidential hopefuls like Florida Gov. Ron DeSantis have put Wall Street’s ESG investing policies near the highest of their political hit lists, a part of an effort to tap into the populist economic sentiment championed by former President Donald Trump.
The anti-ESG campaign has also been bolstered by a small army of conservative nonprofits and advocacy groups, many with ties to wealthy GOP political contributors and fossil fuel firms.
Flush with donor money, organizations with names just like the 1792 Exchange and Consumers’ Research have run ad campaigns criticizing top investment firms including BlackRock, Vanguard and State Street for what they are saying is politically motivated investing.
