In this week’s edition of Economy and Society:
- Labor Department drops defense of ESG rule
- Fed shuts down climate change offices
- Indiana committee adopts ESG-skeptic proxy guidelines
- ESG legislation update
- Jamie Dimon calls for the elimination of proxy advisory services
- Report finds 80% of companies changing ESG policies
In Washington, D.C.
Labor Department drops defense of ESG rule
What’s the story?
The Department of Labor (DOL) filed court documents last week indicating it will stop defending a Biden-era rule allowing ESG considerations in retirement plans. The agency said it plans to propose a new rule to replace it.
Why does it matter?
The rule has faced Republican opposition since 2022 but survived both legal and legislative challenges, including a congressional repeal effort vetoed by President Biden. The DOL’s reversal continues a broader shift away from ESG under the second Trump administration.
What’s the background?
For more on the Biden rule, see here.
Read more
According to ESG Dive:
The Biden administration’s Labor Department finalized the rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” in 2022, and it has been in effect since January 2023. At the time, the agency said the rule overturned guidance from the first Trump administration which had a “chilling effect” on fiduciaries.
The rule allowed retirement plan fiduciaries to consider ESG and other collateral benefits to break a tie when two or more investments “equally serve” the financial interests of the plan and it would be imprudent to invest in both or all options.
The Republican-led states leading the lawsuit have argued that the rule runs afoul of the Employment Retirement Income Security Act of 1974. However, a federal district court judge has twice ruled that the rule was permissible.
Fed shuts down climate change offices
What’s the story?
The Federal Reserve shut down several internal teams created to assess climate-related financial risks. The closures reportedly occurred in March.
Why does it matter?
ESG opponent Stephen Soukup argued in The Dictatorship of Woke Capital that the Federal Reserve has promoted climate-related banking discussions since at least 2019. That year, a senior San Francisco Fed official said climate change was one of the forces reshaping the 21st-century economy. The closures suggest a shift in the Fed’s approach to climate-related initiatives.
Read more
According to Bloomberg:
Among those dismantled are the Supervision Climate Committee and the Financial Stability Climate Committee, which were established in early 2021. That’s around the time the Fed — under President Joe Biden — began to speak more openly about the financial implications of a hotter planet and increasingly erratic weather patterns. Former Fed Vice Chair Lael Brainard said at the time that the two committees were part of an effort to build “institutional capacity and knowledge” on climate risks and vulnerabilities.
Both committees were shut down in March, according to a person familiar with the matter who asked not to be identified disclosing confidential information. Two other climate-focused groups — the Climate Committee on Economic Activity and the Climate Data Committee — were also shuttered around that time, the person said.
Fed staff were notified of the closures through internal emails, one of which came from Kevin Stiroh, a senior Fed official who represents the central bank on climate topics in international forums. Stiroh, who also chaired the Supervision Climate Committee, explained that the Fed will assess climate risk as part of its business-as-usual activities, the person said.
In the states
Indiana committee adopts ESG-skeptic proxy guidelines
What’s the story?
Indiana’s Deferred Compensation Committee voted unanimously in May to adopt ESG-skeptic proxy voting guidelines from Bowyer Research, offered through Institutional Shareholder Services. State comptroller and committee chair Elise Nieshalla argued the move would ensure the state’s proxy votes promote retirees’ financial interests—not ESG initiatives.
Why does it matter?
The committee oversees investments for the Indiana State Employees’ Deferred Compensation Plan. The decision is part of a broader trend as Republican state officials reevaluate proxy voting practices and limit support for ESG-aligned proposals from major asset managers.
What’s the background?
For more on the Bowyer Research proxy voting guidelines, see here.
Read more
According to Comptroller Neishalla’s press release:
Comptroller Nieshalla and committee members reaffirmed their priority of delivering value to the Plan’s shareholders and ended the possibility of proxy votes promoting environmental, social and governance (ESG) factors. Their vote adopted a new policy made available through the proxy voting service, Institutional Shareholder Services (ISS), and in partnership with fund manager, State Street. The new policy, Bowyer Research Proxy Voting Guidelines, provides a voting framework solely focused on shareholder value.
“We were compelled to make this change when we discovered the prioritization of ESG factors can creep into proxy voting policies,” said Comptroller Nieshalla. …
“Step by step, we are turning the tide on ESG on behalf of our retirees to ensure the oversight of their hard-earned dollars is enshrined by the unchanging principal of fiduciary duty,” stated Comptroller Nieshalla, also referencing the recent committee vote to divest from a fund that prioritized ESG factors.
ESG legislation update
Seven state legislatures took action on 11 ESG-related bills last week (since May 27). Five crossed over from one chamber to another, and two passed both chambers.
States with legislative activity on ESG last week are highlighted in the map below. Click here to see the details of each bill in the legislation tracker.
On Wall Street and in the private sector
Jamie Dimon calls for elimination of proxy advisory services
What’s the story?
J.P. Morgan Chase CEO Jamie Dimon criticized proxy advisory firms Institutional Shareholder Services and Glass Lewis May 30, calling them a cancer on corporate governance and arguing for their removal from the shareholder voting process.
Why does it matter?
J.P. Morgan Chase is the world’s largest bank by market capitalization. Dimon’s comments come as proxy advisory firms face political scrutiny over their support for ESG-related shareholder proposals.
What’s the background?
For more on Dimon’s previous comments on ISS and Glass Lewis, see here.
Read more
According to Pensions & Investments:
“We need to get rid of people like ISS and Glass Lewis,” Dimon said at the 2025 Reagan National Economic Forum in Simi Valley, Calif., to the sound of applause. “How they seeped into our system … they are a cancer.” …
Dimon contended that proxy firms use the public pension plans with which they work to promote environmental, social and governance, or ESG, interests, stating that they “look at green stuff and comp (compensation) stuff and social stuff.”
Proxy-advisory firms have come under scrutiny from Republicans in Congress recently, as well. Three GOP senators sent a letter to ISS and Glass Lewis on May 20 expressing concerns over what they view as the firms’ outsized influence and pressing them for information. That followed a House hearing on the matter April 29, when Republicans urged reforms in Congress and at the SEC regarding proxy-advisory firms.
Report finds 80% of companies changing ESG policies
What’s the story?
A new report from the Conference Board found that around 80% of companies plan to change their ESG policies, citing legal and political risks. Only 6% said those changes would be significant.
Why does it matter?
The data suggests many companies are taking a cautious approach as they navigate political scrutiny without fully abandoning ESG commitments.
Read more
According to Fortune:
“There have been a lot of very sudden policy swings,” Andrew Jones, principal researcher at the Conference Board’s Governance & Sustainability Center and author of the report, tells Fortune. “Our member companies are grappling with ‘How do we best navigate this environment?’”
But while the majority of companies are tweaking their ESG policies, only 6% report making significant changes. Instead, most are implementing minor (45%) or moderate (29%) adjustments, according to the report. Boards and senior leaders are prioritizing policy defensibility, return on investment (ROI), and alignment with enterprise value, as opposed to broad expansion of initiatives or a values-led framing, says Jones.
“We’ve seen this both in DEI and in ESG—a much closer legal review, much closer kind of compliance mindset,” Jones said.