The House of Representatives on Thursday passed the Prioritizing Economic Growth Over Woke Policies Act, a bill designed to exclude environmental, social and governance factors from retirement plan considerations.
The bill passed in a 214 to 200 vote with no Democrats voting for the measure.
“ESG funds are proven to carry higher risk and charge steeper fees, and financial institutions have become more brazen in professing partisan and ideological preferences while investing Americans’ hard-earned retirement savings,” said the bill’s sponsor, Rep. Rick W. Allen (R-GA).
Ahead of the bill’s passage, the White House Office of Management and Budget on Tuesday said in a policy statement that the legislation “would severely restrict the ability of fiduciaries of job-based retirement plans to make informed investments on behalf of plan participants and beneficiaries.”
Further, according to OMB, the bill is redundant, as the Employee Retirement Income Security Act of 1974, or ERISA, “already requires fiduciaries to act solely in the interest of plan participants and beneficiaries. ERISA ensures that retirement advisers, plan trustees and administrators, and all other covered entities who are fiduciaries make investment decisions with the singular goal of protecting or growing hardworking Americans’ life savings.”
The legislation calls for overturning a Biden administration rule allowing plan fiduciaries to consider climate change and other ESG factors when selecting retirement investments and exercising shareholder rights, such as proxy voting.
The Biden stance on ESG drew criticism on several fronts. Investors especially questioned the “environmental” part, experts said. Moreover, companies faced criticisms of “greenwashing”; that is, that they are overselling their promises of sustainability.
President Biden vetoed a similar bill last year, claiming it would “put at risk the retirement savings of individuals across the country.”
Younger investors for the most part tend to place more emphasis on investing in companies that align with ESG initiatives than on returns, according to the results of a survey from US Bank.
Data from that survey show that GenZers — those born between 1997 and 2012 — “view wealth differently than older generations, [and] will sacrifice returns to invest in causes they believe in.”
