In this week’s edition of Economy and Society:
- Department of Labor announces ESG retirement plan rule
- Reform UK criticizes ESG in pension plans
- Swiss Re ends participation in SBTi
- California issues guidance on climate risk disclosure law
- Vanguard voted against all E&S proposals in 2025 proxy season
In Washington, D.C., and around the world
Department of Labor announces ESG retirement plan rule
What’s the story?
The Department of Labor (DOL) announced Sept. 4 that it will issue a new rule governing the use of environmental, social, and governance (ESG) factors in retirement plans covered by the Employee Retirement Income Security Act of 1974 (ERISA). The department’s Employee Benefits Security Administration listed the issue in its semi-annual regulatory agenda as a final rule.
Why does it matter?
The DOL’s position on ESG investing in retirement plans has shifted between administrations. In 2020, the first Trump administration issued the Financial Factors in Selecting Plan Investments rule, which explicitly prohibited fiduciaries from considering ESG factors. In 2023, the Biden administration replaced that rule with a new one: Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, which permitted ESG considerations. In May 2025, the second Trump administration announced it would no longer defend the Biden rule in the Fifth U.S. Circuit Court of Appeals.
Legal analysts expect the new Trump rule will go through a full notice-and-comment process, even though it is listed in the Final Rule Stage.
What’s the background?
Title I of ERISA governs private-sector employee benefit plans and establishes standards for fiduciary responsibilities. The Department of Labor issued Interpretive Bulletin 94-1 in 1994, requiring fiduciaries to prioritize financial returns and material risk factors in their investment decisions. Between 1994 and 2020, the department issued several more guidance documents, all requiring fiduciaries to prioritize financial returns and risk mitigation factors in investment decisions but not prohibiting certain ESG investment considerations.
Reform UK criticizes ESG in pension plans
What’s the story?
Richard Tice, deputy leader of the Reform UK Party, said last week that public pension funds in England and Wales were underperforming due in part to investments focused on climate goals. Tice said the party would emphasize financial returns over climate considerations if they win control of the government.
Why does it matter?
Reform UK has recently led public opinion polls and won about 30% of the vote in May 2025 local elections, ahead of both the Labour and Conservative parties. Reform UK has made pension reform a central issue, arguing ESG investing decisions have hurt returns for public sector workers.
ESG supporters argue environmental and social considerations can reduce risks and improve investment performance.
What’s the background?
Nigel Farage founded Reform UK in 2018 as the Brexit Party. The party’s website says: “Only Reform will stand up for British culture, identity and values. We will freeze immigration and stop the boats. Restore law and order. Repair our broken public services. Cut taxes to make work pay. End government waste. Slash energy bills. Unlock real economic growth.”
The Local Government Pension Scheme in England and Wales manages about £392 billion (about $531 billion) in assets across 86 authorities, covering the retirement savings of about 6.7 million public sector employees and retirees.
Swiss Re ends participation in SBTi
What’s the story?
Swiss Re, one of Europe’s largest insurance and reinsurance companies, announced last week it is ending its participation in the Science Based Targets initiative (SBTi) and will no longer participate in the organization’s target-setting process.
Why does it matter?
Swiss Re joined SBTi in 2019 and set emissions-reduction goals in line with its guidelines. The group has recently faced scrutiny from Republican state attorneys general in the United States, who argue the standards could create financial and insurance-related risks for energy producers.
What’s the background?
The Science Based Targets initiative (SBTi) is a nonprofit that develops frameworks for companies to align their emissions targets with international climate agreements. In July 2025, SBTi introduced its Financial Institutions Net-Zero (FINZ) Standard, which sets requirements for participating banks, insurers, and investors to publish fossil fuel policies and align their activities with net-zero goals by 2050.
In August, 23 Republican state attorneys general sent a letter to SBTi and its members, warning that adopting the FINZ standard could limit financing and insurance for fossil fuel companies, raising antitrust and consumer protection concerns.
Click here and here for more information on Republican attorneys general activity opposing SBTi standards.
In the states
California issues guidance on climate risk disclosure law
What’s the story?
On Sept. 2, the California Air Resources Board (CARB) published a draft checklist to help companies comply with the state’s new climate disclosure law, SB 261. The document answers questions on the reporting process and outlines how companies can prepare their first filings under the state’s Climate-Related Financial Risk Act (SB 261).
Why does it matter?
SB 261 applies to companies doing business in California with annual revenues above $500 million and requires them to begin filing reports in 2026. CARB’s guidance clarifies Scope 1, 2, and 3 emissions data will not be required in the first year, citing time constraints and overlap with the separate SB 253 emissions reporting law.
The international Greenhouse Gas Protocol classifies Scope 1 emissions as those from a company’s direct operations, Scope 2 as those from purchased electricity and energy, and Scope 3 as those from indirect activities such as supply chains, business travel, and commuting.
What’s the background?
California enacted SB 261 and SB 253 in 2023, establishing some of the broadest climate disclosure requirements in the country. SB 261 focuses on climate-related financial risk disclosures, while SB 253 requires corporate emissions reporting. Business groups are challenging both laws in federal court (Chamber of Commerce v. California Air Resources Board) on constitutional grounds.
Click here for more on litigation related to California’s climate laws.
On Wall Street and in the private sector
Vanguard voted against all E&S proposals in 2025 proxy season
What’s the story?
Vanguard announced last week that for the second year in a row, it opposed every environmental and social (E&S) shareholder proposal at companies in its portfolios. The firm voted against all 261 such proposals in 2025 and 400 in 2024.
Why does it matter?
Vanguard is the world’s second-largest asset manager and the largest passive manager. In its U.S. regional investment stewardship brief, the firm reported E&S proposals declined this year while anti-ESG proposals increased. Vanguard said it reviews proposals individually but found that the 2025 E&S submissions “did not address financially material risks to shareholders at the companies in question or were overly prescriptive in their requests.”
What’s the background?
Support for environmental and social proposals has fallen for four consecutive proxy seasons. The Conference Board reported that shareholder submissions at Russell 3000 companies dropped from 932 in 2024 to 781 in 2025. Ernst & Young said S&P 1500 companies voted on 149 E&S proposals this year, a 45% year-over-year decrease, with average support falling to 14% from a 2021 peak of 33.3%.