US Senate votes to block ESG investment rule

Market: Coal, Crude oil, Emissions, Natural gas, Oil products
01/03/23

The US Senate has voted to throw out a rule that makes it easier for retirement advisers to consider climate change when making investment decisions, setting up a veto by President Joe Biden.

The Senate voted 50-46 in favor of a Republican-backed measure to disapprove the rule, which regulators said was intended to "clarify" that environmental, social and governance (ESG) issues can be among the factors considered by those who manage pension plans.

US senators Joe Manchin (D-West Virginia) and Jon Tester (D-Montana), both of whom could be up for election in 2024 in conservative states, voted in support of the measure. Republicans say the rule is flawed by allowing retirement managers to elevate issues like climate change over investor returns.

The disapproval bill, which is using fast-track procedures under the Congressional Review Act, already passed out of the US House of Representative in a 216-204 vote on Tuesday. But the bill is dead on arrival at the White House, where Biden has promised to issue the first veto of his presidency.

The rule, issued by the US Labor Department, would clarify that retirement plan managers can consider ESG issues, something a 2020 rule issued under former Donald Trump sought to prohibit. The Biden administration argues the rule would allow investment managers to consider issues like climate change if it would be a factor in potential risks and returns.

"To be clear, the 2022 rule is not a mandate," the White House said. "It does not require any fiduciary to make investment decisions based solely on ESG factors."

Republicans have grown increasingly critical against the factoring climate change into investment decisions. Senate minority leader Mitch McConnell (R-Kentucky) said the rule would let "Wall Street use workers' hard-earned savings to pursue left-wing political initiatives." The rule's supporters say it makes sense to consider all risks, such as the potential for emission limits to impair investments into fossil fuels.

By Chris Knight

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