The Battle Over E.S.G. Heads to the White House
NY Times, By Andrew Ross Sorkin, Ravi Mattu, Bernhard Warner, Sarah Kessler, Michael J. de la Merced, Lauren Hirsch and Ephrat Livni
The Battle Over E.S.G. Heads to the White House
President Biden is expected to use his first veto to protect environmental, social and corporate governance investment considerations in retirement plans.
By Andrew Ross Sorkin, Ravi Mattu, Bernhard Warner, Sarah Kessler, Michael J. de la Merced, Lauren Hirsch and Ephrat Livni
March 2, 2023
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E.S.G. heads to a veto showdown
Senate Republicans, helped by two Democratic defectors, voted on Wednesday to block a Labor Department rule allowing retirement plan managers to include environmental, social and corporate governance considerations (E.S.G., for short) in their investment plans.
The Senate resolution — a version of which already passed the House, and which is expected to draw President Biden’s first veto — may seem focused on an obscure rule. But it’s another sign of how fights over E.S.G. are spreading through politics, with increasingly bigger stakes.
The Labor Department rule was meant to undo a Trump-era dictum limiting investment managers to considering only purely financial factors in their decisions. Advocates of the rule have used the common E.S.G. defense that concerns about climate change and treatment of workers are legitimate financial issues for investment managers to weigh. They add that the rule is neutral, and managers are free to disregard E.S.G. issues.
But Republicans described the rule as “woke” overreach, and were aided by the Democratic senators Joe Manchin of West Virginia and Jon Tester of Montana — both of whom are running tough re-election races in states with sizable fossil-fuel industries. (Quietly backing many of these anti-E.S.G. efforts are well-funded right-wing advocacy groups with ties to conservative donors.)
White House aides said Mr. Biden would veto the measure; it’s unclear that Congress, which passed the measure with only slim majorities, can muster the two-thirds vote needed to override that.
The battle over E.S.G. will only get wider. Republicans are likely to keep making it a political punching bag. Investment firms in turn are increasingly worried that incorporating socially minded issues in their decisions will cut into their profits.