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The Senate voted Wednesday 50-46 to block a Labor Department rule that the Biden submitted to the Department of Labor in November 2022 that allowed retirement fund managers to consider environmental, social and governance (ESG) factors when making investments.
Senators Joe Manchin (D-WV) and Jon Tester (D-MT) voted with all 48 Republicans who disapproved of the rule.
The Congressional Review Act kicked in after President Biden created this executive order. Under the Act, Congress is allowed to pass a disapproval resolution to block these orders. In the end, Biden has the last say. The resolution is subject to the president’s veto.
Before the Biden Administration created this Labor rule, managers could only consider fiduciary factors when making investments.
“I really am okay with what you want to invest in as long as it’s going to push the best rate of return,” said Senator Mike Braun (R-IN) on the Senate floor. Braun is the lead sponsor of the resolution .
“Now, over the long run, if something changes, that’s different. But currently, this rule now allows the criterion of using those ESG goals, which would be simplified, being able to push a certain ideology, a certain point of view into how requirement earnings are invested,” added Braun.
“You’ve got to remember, this is a fiduciary thing. Most people, when they give money to their financial advisor, their broker, they would think that it’s going to to get the best return,” Braun further added..
“Bloomberg tracked it,” Braun added. “If you would actually invest according to ideology over the past few years, it would have been the difference between an 8.9% return and 6.3% return. Imagine trying to explain that in a way where someone trusted that you would be doing the best thing with their hard-earned money to get the best financial return. That is nearly a 30% cut in what you would have had otherwise. I’ve got to believe everybody would be thoroughly upset with that.”
On the other side of the aisle, Senate Majority Leader Chuck Schumer (D-NY) defended ESG investment practices ahead of the vote.
“ESG opponents are trying to turn it into a dirty acronym, deploying attacks they have long used for elements of a so-called woke agenda. They call ESG wokeness. They call it a cult. They call it an incursion into free markets. We’ve heard it all before. I say ESG is just common sense,” wrote Schumer in the Wall Street Journal op-ed he authored.
Vanguard and BlackRock were against Biden’s ESG resolution.
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