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In a follow-up to our February 3, 2023 Blog post, DOL Finalizes New Regulations –Retirement Plan Fiduciaries May—But Are Not Required To –Take Into Account Environmental, Social, and Governance Factors When Making Investment Decisions and Exercising Shareholder Rights | The Energy Law Blog:
On Tuesday and Wednesday, the U.S. Congress, split primarily along party lines, passed disapproval resolutions, legislatively overruling a Biden administration rule recently issued by the Department of Labor ("DOL") that generally permits retirement plan fiduciaries to consider environmental, social and governance ("ESG") factors when making investment decisions for plans governed by the Employee Retirement Income Security Act ("ERISA"). The resolutions passed in a 50-46 Senate vote on Wednesday and a 216-204 House vote on Tuesday. As both the Senate and House have passed the resolution, the legislation now goes to President Biden's desk. The White House has stated that President Biden will veto the bill if sent to his desk. See FoxNews, CNN, and Reuters. If President Biden vetoes the legislation, the House and Senate do not appear to have the votes to overturn the veto. That said, the issue likely will continue to garner attention as 25 state attorneys general have challenged the DOL rule in a Texas court, see Roll Call, and Florida governor Ron DeSantis, currently a front-runner for the Republican Presidential nomination, recently approved measures in his state restricting State of Florida pension plans from considering ESG factors when making investment decisions, see State of Florida website.
In brief, there is continuing uncertainty regarding the use of ESG factors by ERISA retirement plan fiduciaries when making investment decisions. The best course of action for ERISA retirement plan fiduciaries is to be cautious if utilizing ESG factors when making investment decisions and to otherwise continue applying traditional fiduciary principles, such as, prudence, acting solely in the interest of plan participants, exclusive purpose of providing benefits, defraying expenses, and diversification, when making these decisions.
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