President Biden Vetoes Resolution Limiting ESG Consideration in ERISA Plans
President Joseph R. Biden vetoed a resolution by Congress to disapprove the DOL's final rule explicitly allowing ERISA plan fiduciaries to consider environmental, social and governance factors when selecting investments and exercising certain shareholder rights.
In a message to the House of Representatives, President Biden asserted that the Congressional resolution would "prevent retirement plan fiduciaries from taking into account factors, such as the physical risks of climate change and poor corporate governance, that could affect investment returns."
As previously covered, the DOL released a number of interpretive bulletins permitting ESG investing. In 2020, the DOL amended ERISA's investment duties regulation to require plan fiduciaries to select investments based solely on financial considerations. In connection with that rule, however, the DOL stated that an ERISA "fiduciary's determination with respect to an investment or investment course of action must be based on factors that the fiduciary reasonably determines are relevant to a risk and return analysis" and that "[r]isk and return factors may include the economic effects of climate change and other environmental, social or governance factors on the particular investment or investment course of action." Further, the DOL said that if a fiduciary believes that two investments are likely to produce equivalent returns, the fiduciary may select the investment that provides "collateral benefits other than investment returns."
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