February 1, 2023

WASHINGTON, D.C., February 1, 2023 – Senator Katie Britt, Senator Mike Braun, and a bipartisan group of 48 additional Senators today introduced a formal challenge to President Joe Biden’s ESG rule which politicizes millions of Americans’ retirement investments to favor the Administration’s ideological preferences rather than getting the best financial returns for Americans.

The Senators joining the effort also include Senate Republican Leader Mitch McConnell and Senators Thune, Barrasso, Blackburn, Boozman, Budd, Cassidy, Capito, Collins, Cornyn, Cotton, Cramer, Crapo, Cruz, Daines, Ernst, Fischer, Graham, Grassley, Hagerty, Hawley, Hoeven, Hyde-Smith, Johnson, Kennedy, Lankford, Lee, Lummis, Manchin, Marshall, Moran, Mullin, Murkowski, Paul, Ricketts, Risch, Romney, Rubio, Rounds, Schmitt, Rick Scott, Tim Scott, Sullivan, Tillis, Tuberville, Vance, Wicker, and Young.

“Hardworking American families, retirees, and small businesses are already being crushed by generationally high inflation fueled by the Biden Administration’s wasteful tax-and-spend spree and reckless Green New Deal agenda,” said Senator Katie Britt. “Now, the President wants 152 million Americans to take an additional financial hit to their hard-earned retirement savings to further a leftwing political agenda. Fiduciaries have an obligation to put the financial wellbeing of their investors first – not political whims.”

In November, President Biden instituted a rule that explicitly permits ERISA retirement plan fiduciaries to consider environmental, social, and corporate governance (ESG) factors when selecting investments and exercising shareholder rights.

This Biden Admin decree replaces a previous rule which mandated fiduciary decisions be made solely on getting the best returns for the 152 million American workers that depend upon ERISA for their retirement. Because ERISA covers most employer-sponsored retirement plans, we’re talking about $11.7 trillion in assets here.

Under President Biden’s rule, retirement fund managers can prioritize ESG factors instead of financial returns in their investment decisions for workers’ hard-earned savings. Plan participants could unknowingly be enrolled in ESG funds, which may not align with their political views. In the most recent survey, most Americans think it’s a bad idea for companies to use their financial influence to advance a political or social agenda, as is the case in ESG investing.

A number of studies have shown that ESG investing policies have worse rates of return. For example, a study by UCLA and NYU found that over the past five years, ESG funds underperformed the broader market, averaging a 6.3% return compared to an 8.9% return respectively. Additionally, in comparison to other investment plans, ESG investors generally end up paying higher costs for worse performance.

“President Biden is jeopardizing retirement savings for millions of Americans for a political agenda,” stated Senator Mike Braun. “In a time when Americans’ 401(k)s have already taken such a hit due to market downturns and record high inflation, the last thing we should do is encourage fiduciaries to make decisions with a lower rate of return for purely ideological reasons. That’s why we are proud to stand up against this rule for the millions of Americans who depend on these funds for their retirement.”

This disapproval resolution is expected to receive a vote on the Senate and House floors. Under Senate and House rules respectively, the bill authors in each chamber will be able to force a vote on this resolution to nullify the rule. Additionally, the resolution only requires a simple majority vote threshold to pass and be sent to the President.