U.S. States Challenge Biden Rule on ESG Investing

A coalition of 25 U.S. states filed a lawsuit seeking to strike down a Biden administration rule allowing retirement plans to consider ESG factors.

By Daniel Wiessner

A coalition of 25 U.S. states led by Texas and Utah filed a lawsuit seeking to strike down a Biden administration rule allowing retirement plans to consider environmental, social and governance (ESG) factors such as climate change and racial justice when selecting investments.

The states filed a complaint in a federal court in Amarillo, Texas, on Thursday, Jan. 26, arguing that the rule finalized in November will lead many retirement plans to focus on a social agenda rather than long-term financial stability for investors.

The rule, which takes effect on Monday, Jan. 30, reverses restrictions on socially conscious investing that were adopted by the Trump administration.

The states in Thursday’s lawsuit said the new rule fails to justify the departure from Trump-era regulations, in violation of the federal law governing rulemaking.

And, the states said, it violates the U.S. law that regulates employee benefit plans by failing to protect retirement assets.

The U.S. Department of Labor, which adopted the rule, and the White House did not immediately respond to requests for comment on Friday.

Texas Attorney General Ken Paxton, a Republican, in a statement called the rule “insulting and illegal.”

“For generations, federal law has required that fiduciaries place their clients’ financial interests at the forefront, and I intend to fight the Biden Administration in court to ensure that they cannot put hard-working Americans’ retirement savings at risk,” Paxton said.

The lawsuit was assigned to U.S. District Judge Matthew Kacsmaryk, a Trump appointee who has struck down Biden administration rules on immigration and healthcare protections for LGBT people.

The case is Utah v. Walsh, U.S. District Court for the Northern District of Texas, No. 2:23-cv-00016.

This article was provided by Reuters.

 

Latest news

Advisors Dabbling in DC Market Seek Greater Support: Cerulli

Providing them with tools, education and guidance would help them grow their retirement-plan businesses, says Cerulli Associates.

Executives Traveling on Corporate Jets Face IRS Scrutiny

Do you have executive clients who might be using a corporate jet for personal use? Tell them the IRS has announced a crackdown.

U.S. Solo Renters Age 50+ Way Up

The number living alone rose by more than half a million, but there’s been a growing trend of older people living with roommates.

SEC Settles Charges Against Former Advisor

The former advisor, Andrew Komarow, was known in the industry for working with special needs families and neurodivergent clients.

SEC Fines TIAA Unit $2.2M for Violating Reg BI

The SEC said a TIAA broker-dealer charged some retail customers too much to invest in mutual-fund choices in an IRA.

Even Millionaires Flunk Retirement 101: Study

The American College of Financial Services plans to use its new research to help advisors improve client conversations.