Congressman Introduces Bill to Exclude ESG Factors from Retirement Investment Plans

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Congressman Greg Murphy, M.D. introduced the Safeguarding Investment Options for Retirement Act, legislation to prohibit tax-advantaged retirement plan trustees from considering factors other than financial risk and return when making investment decisions on behalf of workers, retirees, and their beneficiaries. 

“Retirement plans, like 401ks, that are tax-advantaged to help individuals save for retirement should be managed to maximize return, not to invest in risky holdings like those propped up by ESG factors,” said Congressman Greg Murphy, M.D. “Americans’ nest eggs should be built on a solid foundation that confers the greatest growth probability, not investments that are unstable and whitewashed with fake ethical and sustainability scores. Such an endeavor may be noble for those willing to pursue it independently but not managed plans that millions rely on for retirement.” 

“Today’s inflation crisis has already been devastating to seniors and those living on fixed incomes, and now radical ESG proposals supported by President Biden and Washington Democrats threaten to wipe out what remains of seniors’ retirement savings,” said Ways and Means Committee Chairman Jason Smith. “Built into our tax code are strict protections for seniors that require retirement plan trustees to make decisions for the exclusive benefit of retirees and beneficiaries. What liberal policymakers are pushing amounts to little more than a license to gamble with seniors’ retirement savings by favoring climate activism over seniors’ financial security. Congress must examine ways to strengthen these safeguards to protect seniors from dubious ESG investments that put their retirement at risk.” 

“Retirement plan trustees should be focused on maximizing investment decisions for their beneficiaries instead of promoting environmental and social agendas,” said Ways and Means Subcommittee on Tax Chairman Mike Kelly. “We have seen retirement plans steered by ESG guidelines perform worse than traditional investments. This legislation takes a stand for American retirees and investors whose investment plans are not a pawn in the left’s environmental and equity agendas.” 

In recent years, we have seen some retirement plans prioritize Environmental, Social, and Governance (ESG) factors that have performed more poorly compared to traditional investments, raising questions about trustees’ priorities for investment. 

The House Ways and Means Committee held a hearing on November 7th, 2023, in which we heard from expert witnesses who discussed ways in which ESG investing can hurt retirees and investors. 

Tax-advantaged retirement plans should be focused on maximizing returns, not on arbitrary factors that can harm retirees, leading to diminished standards of living in retirement and indirect losses for the economy as a whole. 

Related Article: U.S. Announces Rule Allowing Consideration of ESG Factors in Retirement Plan Investments

Under this legislation, if plans are found to be using non-financial risk and return factors, they risk losing their tax-advantaged status. 

Read the bill here