WASHINGTON (CN) — Members of Congress came together in a bipartisan fashion Monday to condemn President Joe Biden's use of veto power to make environmentally conscious investments a larger part of retirement savings plans.
Short for environmental, social and corporate governance factors, ESG standards are meant to signal to investors that a publicly traded company operates in a socially or environmentally conscious manner. After the Department of Labor passed a rule late last year that would empower the managers of retirement funds to consider ESG standards when choosing where to invest, both chambers of the legislature passed a resolution to signal their disapproval.
The White House defended Biden's veto of the resolution Monday, pointing to the evidence that ESG factors can have a material impact on how markets and businesses perform.
“The Republican-led resolution would force retirement managers to ignore these relevant risk factors, disregarding the principles of free markets and jeopardizing the life savings of working families and retirees,” the administration said in a statement. In particular, the GOP’s block would preclude investment managers from considering the physical effects of climate change and poor corporate governance, which the White House contended could affect investment returns.
“Retirement plan fiduciaries should be able to consider any factor that maximizes financial returns for retirees across the country. That is not controversial — that is common sense,” the statement continues.
In an additional, recorded statement, President Biden said that Congress’ resolution would put retirement savings at risk. “It makes sense to veto it,” he added.
House Speaker Kevin McCarthy, who signed the joint resolution last week, voiced his frustration Monday with the president’s disapproval.
“In his first veto, Biden just sided with woke Wall Street over workers,” the California Republican tweeted. “Tells you exactly where his priorities lie.”
The resolution was the first piece of legislation to get McCarthy’s signature in his role as speaker of the House, a position he assumed in January after Republicans wrested control of Congress’ lower chamber in the fall midterm elections.
Speaking in Florida where the GOP is holding its annual retreat this week, McCarthy said the proposed labor rule allows investment managers to use retirement savings to fund what he called far-left political causes, and bemoaned the president’s veto despite bipartisan support for the resolution.
Just three congressional Democrats voted in favor of the measure — one in the House and two in the Senate.
West Virginia Senator Joe Manchin, who has been known to break with the Democrats’ voting bloc and who supported the joint resolution in the upper chamber’s 50-46 vote March 1, said Monday that the proposed ESG rule places politics over strong returns on retirement investments.
“This administration continues to prioritize their radical policy agenda over the economic, energy and national security needs of our country, and it is absolutely infuriating,” Manchin said in a statement. “Despite clear and bipartisan rejection of the rule from Congress, President Biden is choosing to put his administration’s progressive agenda over the well-being of the American people.”
If made final, the rule proposed by the Labor Department would clarify the language of regulations under the Employee Retirement Income Security Act to open the door for retirement plan managers to consider ESG factors.
The agency has said that the current guidelines, last updated in 2020 under President Donald Trump, were unclear about whether it was legal for investment managers to take such standards into account. It concluded, after a review with stakeholders, that the regulations could be seen as guiding retirement planning away from ESG investments.
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