Republicans urge regulators to ban ESG and DEI considerations

February 6, 2025

Republican finance officials from 18 states have urged leaders of the Securities and Exchange Commission (SEC) and Department of Labor (DOL) to prohibit asset and retirement plan managers from considering ESG or DEI factors in investment decisions.

In a letter to acting SEC Chair Mark Uyeda and Labor Secretary Vince Micone, 22 state finance officials, including auditors and comptrollers from Alabama and Mississippi, called on the agencies to regulate against the use of ESG and DEI.

The financial officials requested the agencies to clarify that making investment decisions or proxy votes based on ESG or DEI goals is “inconsistent with fiduciary duties” and to provide comprehensive guidance on fiduciary loyalty requirements under the Employee Retirement Income Security Act of 1974 regarding ESG and DEI.

The agencies have also been urged to begin rulemaking to prevent plans from using assets to "advance political or social agendas" and to strengthen oversight and enforcement of asset and retirement plan managers who consider such factors in their investment decisions.

The letter references Texas federal judge Reed O’Connor’s ruling that American Airlines violated federal law by allowing its asset manager, BlackRock, to consider environmental factors when managing its employee retirement plan.

ESG and DEI have gained significant attention from Republicans since the party took office in January. A group of nine state attorneys general warned six financial firms of potential legal action over their diversity and climate investment policies.

Meanwhile, 19 attorneys general urged Costco to abandon its DEI policies or justify keeping them. This followed a proposal from the National Center for Public Policy Research, recommending that Costco assess any potential risks linked to its DEI practices and policies.

Minerva’s blog focuses on the latest developments in ESG investing and stewardship. Minerva is a global provider of sustainable stewardship solutions with over 25 years of expertise. Minerva empowers investors by providing essential tools, including ESG research and data, enabling them to navigate the intricate landscape of stewardship and proxy voting, whilst ensuring their decisions are well-informed and aligned with sustainable principles.

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