The US Labor Department has responded to the more than two dozen red states, energy companies, and workers that have filed lawsuits to overturn the rule allowing socially aware retirement saving, claiming that the objections are based on a “false assumption.”
On Tuesday, March 28, 2023, regulators filed nearly identical opposition briefs in separate federal court cases in Texas and Wisconsin, stating that the ESG investing guideline confirms the department’s long-held view that financial returns are crucial and that “collateral benefits” should be considered only when two or more investment alternatives are economically similar.
According to the DOL, the GOP-led opposition to the regulation inaccurately alleges that the agency has adopted a rule allowing corporate retirement plan decision-makers to pursue non-financial interests. It is a “thinly disguised attempt,” according to the papers, to reverse the Biden administration’s effort to examine environmental, social, and corporate governance
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requirements in the same way as any other significant element of the risk or return market.
Republican state attorneys general, as well as different fossil fuel companies and trade groups, are challenging the order in the US District Court for the Northern District of Texas. It is also being challenged i
n the Court of Federal Claims for the Eastern District of Wisconsin by many occupational retirement plan members.
Both petitions allege that the government is violating its responsibilities under federal benefits law and administrative procedural rules by weakening the performance of 401(k) plans in pursuit of radical investing theories.
Fiduciaries, or retirement plan officials, are often bound to severe rules of behavior specified by the DOL that control the process through which they can choose and manage investments.
“Most of their concerns are with the DOL’s conclusions or ESG investment in general, which are matters of policy,” the agency wrote in its Wisconsin brief about the plaintiffs. “But, Plaintiffs’ request for this Court to substitute its judgment for that of the agency is inappropriate, and it is factually erroneous to argue that the Rule requires fiduciaries to choose (or even consider) ESG-focused assets.”
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The department’s rule, which went into effect in January, overturned a pair of Trump-era regulations that the department claimed had a “chilling impact” on fiduciaries who would want to consider ESG issues when conducting a tie-breaker test between substantially identical investments. Nonetheless, both administrations and others dating back decades have adhered to the concept that economic reasons should always take precedence.
According to the brief, “the Regulation restates the Department’s viewpoint,” which has not changed for over 3 decades, through five presidencies, or in the rules it rescinds.
Republicans have pounced on the department’s stance on ESG investing on numerous fronts, most recently proposing legislation in Congress that would expressly restrict its consideration under the ERISA of 1974.
However, on Tuesday, Northern District of Texas Judge Matthew J. Kacsmaryk dismissed the department’s request to transfer the lawsuit to a more favorable jurisdiction. The Amarillo division’s lone judge has been responsible for overturning numerous significant Biden administration rules.
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