House passes resolution to repeal DOL ESG rule 

March 2, 2023

House lawmakers have approved a resolution to overturn the Department of Labor’s (DOL’s) new ESG rule for retirement plans, after 25 Republican states filed a suit to invalidate the rule.  

On February 28, the US House of Representatives rejected the DOL’s Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholders Right rule.

Republicans had filed the suit back in January to invalidate the rule for undermining key protections for retirement savings of 152 million US workers.  

First introduced in November last year, the rule allows plan fiduciaries to consider climate change and ESG in selecting investments.  

From January 30, fiduciaries were encouraged, but not required, to take policies which protect against the threats of climate-related risks into consideration.  

However, the Congressional Review Act resolution passed a vote of 216-204 supported by all House Republicans to nullify the rule over concerns it could lead to fiduciaries sacrificing investment returns to prioritize ESG, which would harm everyday retirement savers.  

President Biden has since announced his plan to veto the resolution if it passes both chambers of Congress. This would mark Biden’s first veto of his administration. 

While many Republicans have challenged ESG investing, some have recently rejected anti-ESG measures.  

On February 21, Wyoming rejected two proposed pieces of anti-ESG legislation over concerns of the potential negative costs to the state.   

The Wyoming House of Representative Appropriation Committee unanimously recommended not to pass the Stop-ESG Eliminate Economic Boycott Act and Stop ESG-State Fund Fiduciary Duty Act.

The state’s decision to reject the anti-ESG bills contradicts previous action taken to restrict ESG investments.  However, the bills were opposed due to concerns over how broadly and subjectively ESG is defined and the negative cost of limiting investments.  

The Stop-ESG Eliminate Economic Boycott Act aimed to prevent government entities from investing in any company that engages in economic boycotts. Firms would be required to provide written assurance that they would not limit activities against a company for its involvement in fossil fuels, timber, mining, agriculture, or firearms.   

Senator Biteman of Wyoming said: “We’re using our massive purchasing power, along with other states that are in the same situation, to fight back against this economic warfare that’s happening against fossil fuels.”  

The Stop ESG-State Fund Fiduciary Duty Act would have outlined rules that state funds should disallow the consideration of ESG factors when making investments. The bill would require all investment managers for states fund to take into account “only financial factors.”  

Sam Masoudi, Wyoming Retirement System’s chief investment officer, raised concerns that the bill’s vague definition of ESG could restrict investment in a wide range of companies.  

He said: “In some cases, it’s defined so broadly here that if a company has a statement about being supportive of diversity for instance that might be enough to get them on the do not invest list.”  

In January, North Dakota also opposed a bill that aimed to prevent financial institutions from discriminating against energy companies and participating in a boycott. The bill was rejected as definitions of financial institutions were too vague and did not provide ample due process.