Biden Admin Moves to Nix US States’ Challenge to ESG Investing Rule
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The Biden administration has asked a federal judge to toss out a lawsuit by Republican-led states seeking to strike down a rule allowing socially-conscious investing by employee retirement plans.
The U.S. Department of Justice in a filing in Amarillo, Texas federal court on Friday said the rule was needed to replace improper limitations that the Trump administration had placed on considering ESG factors in making investment decisions.
A coalition of 25 states led by Utah and Texas sued in January, claiming the U.S. Department of Labor rule would imperil the retirement savings of millions of Americans by allowing investments to be made based on political agendas rather than financial considerations.
The states moved last month for a ruling permanently blocking the rule, which took effect Jan. 30.
The Biden administration on Friday said the rule makes clear that retirement plans must base decisions primarily on financial factors. But unlike the Trump-era rule, it also recognizes that issues such as climate change and social justice can impact companies’ long-term financial health, the Justice Department said.
See related article: President Biden Uses First Veto To Defend Rule on ESG Investing
The offices of Utah Attorney General Sean Reyes and Interim Texas Attorney General John Scott did not immediately respond to requests for comment.
The new rule covers plans that collectively invest $12 trillion on behalf of 150 million Americans.
Congress voted in March to repeal the rule but Democratic President Joe Biden vetoed the proposal.
The case has been assigned to U.S. District Judge Matthew Kacsmaryk, a conservative appointee of former Republican President Donald Trump whose courthouse has become a favored destination for Republicans challenging various aspects of the Biden administration’s agenda.
Kacsmaryk has not scheduled a hearing on the pending motions.
The judge in March rejected the Biden administration’s claim that the states were improperly “judge shopping” by filing the lawsuit in Amarillo, where Kacsmaryk is the only judge.