A group of Republican attorneys general is urging Congress to disapprove the Labor Department’s reversal of a Trump-era rule that limited retirement investments in companies that adhere to environmental, social and governance (ESG) goals.
In the letter, signed by attorneys general from 27 states, signees argued that the DOL’s new rules – dubbed the 2022 rule – “threatens the financial stability of millions of Americans and blatantly violates federal law.”
“Americans’ retirement savings are now threatened as hundreds of asset managers have committed to prioritizing ESG policies over workers’ financial interests,” the attorneys general argued.
The signees pointed to studies demonstrating that global ESG funds have underperformed the broader market by more than 250 basis points per year – an average 6.3% return compared with a nearly 9% return.
“This would mean an investor who put $10,000 into an average global ESG fund in 2017 would have about $13,500 today, compared with $15,250 if he had invested in the broader market,” the attorneys general said. “So these asset managers are also threatening the financial security of two-third of the United States adult population.”
The DOL’s regulation, implemented in November, reversed efforts by the Trump administration to put restrictions on the ability of fiduciaries to consider any other factors outside maximizing benefits for retirement plan beneficiaries.
Labor said the rule reopens that door and fits in with President Biden’s executive order from May 2021 that directed the government to enact policies that “protect the life savings and pensions of America’s workers and families from the threats of climate-related financial risk.” According to Labor, giving fiduciaries more leeway to invest in ESG companies is one of those policies.
Last month, Republican attorneys general from 25 states, led by Texas AG Ken Paxton and Utah AG Sean D. Reyes, sued the Biden administration in an attempt to block Labor’s new rules.
In announcing the ruling, Paxton alleged the rule “prioritizes woke [ESG] investing over protecting the retirement savings of approximately two-thirds of the U.S. population.”
“Given the detrimental effects of this brazen violation of federal law will have on millions of Americans, we urge Congress to disapprove the 2022 Rule,” the attorneys general wrote in Tuesday’s letter. “Under the [Congressional Review Act], Congress has the power to erase this federal rule by issuing a joint ruling of disapproval.”
The attorneys general implored congress to act “immediately,” noting that Sen. Mike Braun, R-Indiana, and Rep. Andy Barr, R-Kentucky, have introduced a joint resolution to eradicate Labor’s 2022 Rule.
“We ask every member of the United States Congress to support this resolution to prevent asset managers from sacrificing Americans’ hard-earned retirement savings for political causes.”
FOX Business has reached out to the Department of Labor for their response.