GOP Lawmaker Introduces Bill to Prioritize Financial Returns over ESG in Retirement Savings

The U.S. Capitol in Washington on March 23, 2023. Richard Moore/The Epoch Times

Rep. Rick Allen (R-Ga.) introduced legislation requiring financial advisers investing Americans’ retirement savings to prioritize financial returns over environmental, social, and governance (ESG) factors.

The purpose of HR 5339, the Rollback ESG To Increase Retirement Earnings (RETIRE) Act (pdf), is to change the Employee Retirement Income Security Act of 1974 to specify requirements concerning the consideration of financial and other factors.

Mr. Allen’s bill, introduced on Sept. 5 via a press release on his website, cited a Department of Labor (DOL) announcement of a rule from November 2022 that removed “barriers” and allowed retirement investors to “consider climate change and other environmental, social, and governance factors when they select retirement investments and exercise shareholder rights, such as proxy voting.”

The legislation, introduced to the Committee on Education and the Workforce, states that “a fiduciary of a plan shall be considered to act solely in the interest of the participants and beneficiaries.”

The lawmaker’s bill outlines several key provisions to prioritize the protection of the earnings of Americans to deal with the rules put in place by the current administration in dictating how investment decisions are made.

“President Biden will stop at nothing to inject his costly, rush-to-green agenda into every aspect of Americans’ lives,” Mr. Allen said in his press release introducing the legislation.

“By empowering financial advisers to invest Americans’ retirement savings in risky, climate-related ESG funds, the Department of Labor (DOL) is blatantly prioritizing its radical political agenda over Americans’ hard-earned savings.”

The DOL rule from 2022 that is being challenged, the Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, caused concern among some when it was announced that two rules issued during the Trump administration “unnecessarily” restrained plans’ ability to weigh environmental, social, and governance factors when choosing investments.

“Today’s rule clarifies that retirement plan fiduciaries can take into account the potential financial benefits of investing in companies committed to positive environmental, social, and governance actions as they help plan participants make the most of their retirement benefits,” former Secretary of Labor Marty Walsh said at the time.

“Removing the prior administration’s restrictions on plan fiduciaries will help America’s workers and their families as they save for a secure retirement.”

The DOL rule came following a May 2021 executive order that directed the federal government agencies to “protect the life savings and pensions of America’s workers and families from the threats of climate-related financial risk.”

Assistant Secretary for Employee Benefits Security Lisa M. Gomez stated, “Climate change and other environmental, social, and governance factors can be useful for plan investors as they make decisions about how to best grow and protect the retirement savings of America’s workers.”

Mr. Allen asserted that he believes President Joe Biden’s administration’s rules on investing are an overreach of government and irresponsible for Americans struggling to meet expenses.

“That is why I am proud to introduce the RETIRE Act, which will roll back President Biden’s overreaching rule and codify that retirement plan sponsors must make investment decisions based on financial returns,” he said.

“Under so-called ‘Bidenomics,’ Americans are struggling to afford basic necessities like gas and groceries. The last thing hardworking taxpayers need is for their retirement savings to be depleted due to politically motivated mismanagement. The RETIRE Act would right this wrong and ensure Americans have a say in their financial future.”

The White House did not immediately respond to The Epoch Times’s request for comment.

Investment companies such as BlackRock and Vanguard have cut back on support for their shareholders’ ESG proposals, according to recent reports. Vanguard announced on Aug. 28 that it was narrowing support for the projects, backing only 2 percent of such proposals for 2023.

The company reported that this year, 359 environmental and social proposals were filed by U.S. shareholders, an almost 25 percent increase over 2022.