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.