States sue Biden administration over ESG in retirement plans

Twenty-five states announced on January 26 that they had filed a lawsuit against the Biden administration alleging that, in their view, the Department of Labor’s new rule allowing for the consideration of ESG factors in Employee Retirement Income Security Act (ERISA)-governed retirement investments increased portfolio risk and violated the law:

“A group of 25 states on Thursday filed a federal lawsuit against the Biden administration, arguing a recent rule allowing retirement plan managers to factor environmental and social issues into investment decisions violated the law.

“The lawsuit — led by Utah Attorney General Sean Reyes and joined by 24 other states including Louisiana, Texas and Virginia — challenges a Department of Labor (DOL) rule unveiled in November and which is set to go into effect on Jan. 30. The rule would open the door for fiduciaries to factor so-called environment, social and governance (ESG) considerations into Americans’ retirement accounts, an action the states argued could significantly harm the financial interests of customers.

“‘The Biden administration is promoting its climate change agenda by putting everyday people’s retirement money at risk,’ Reyes told FOX Business in a statement. ‘Americans are already suffering from the current economic downturn.’

“‘Permitting asset managers to direct hard-working Americans’ money to ESG investments puts trillions of dollars of retirement savings at risk in exchange for someone else’s political agenda,” he continued. ‘We are acting with urgency on this case because this illegal rule is set to take effect next week. It must be stopped.’

“The two dozen states filed the challenge in a federal district court in Texas and asked the court for a preliminary injunction to prevent the DOL from implementing the rule until a ruling had been issued in the case.

“In the lawsuit, the states allege that the DOL violated the Employee Retirement Income Security Act (ERISA) of 1974. The law safeguards the retirement income of 152 million U.S. workers, equivalent to more than two-thirds of the nation’s adult population, and covers roughly $12 trillion in assets.”

In its coverage of the story, which focused specifically on Wyoming’s participation in the lawsuit, The Center Square quoted market analyst and ESG opponent Stephen Soukup, who suggested that the lawsuit could test the Biden administration’s approach to climate change and noted that a group represented by former Labor Department official Jonathan Berry had joined the plaintiff states:

“According to Stephen Soukup, who’s head of the investment consulting group The Political Forum, not only will the lawsuit test the nation’s tolerance for non-pecuniary ESG investing, but it will also ‘test the legitimacy of the Biden administration’s ‘whole of government’ approach to climate change and the power of administrative agencies to rewrite the plain meaning of long-standing statutes.’

“‘It is worth noting that, in addition to half the states filing suit, Liberty Energy has joined the plaintiffs as well,’ Soukup said. ‘Liberty is represented in this case by Jonathan Berry of Boyden Gray & Associates and Berry is, himself, a former Labor Department official, who worked specifically on preserving the clear meaning of ERISA and preventing ESG advocates from playing politics with Americans’ retirement accounts.’

The challenged rule went into effect on January 30 as planned:

“Starting Monday, retirement plan managers will be able to factor in a company’s environmental, social, and governing (ESG) positions when making investment decisions, as a Biden administration rule goes into effect – despite the objection of 25 Republican-led states.

“The lawsuit was filed Thursday in federal court in Texas. The court has yet to issue a ruling on the request for an injunction.  If granted, the rule would be blocked for the duration of the case, depending on any subsequent

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