On Wednesday, US Senate adopted a resolution to overturn a new Labor Department ESG investing rule, a move that undermines the growing influence of conservatives in Washington.
In a 50-46 vote, the US Senate adopted a resolution to overturn a Labor Department rule that would facilitate fund managers’ investments in environmental, social, and corporate governance (ESG) after Democrats Jon Tester and Joe Manchin sided with Republican lawmakers on Wednesday.
Tester, a senator from Montana who was joined by fellow Democrat Manchin in voting to roll back the new ESG rule, justified his decision by saying it “undermines retirement accounts for working Montanans.”
“At a time when working families are dealing with higher costs, from healthcare to housing, we need to be focused on ensuring Montanans’ retirement savings are on the strongest footing possible.”
President Joe Biden is expected to veto the Republican bill, preventing pension fund managers from making investment decisions based on climate change and other factors. They claim the rule would politicise investing by pushing managers to invest in liberal causes, thus hurting performance.
ESG – which stands for environmental social and corporate governance – is an alternative approach to evaluating the extent to which a corporation works on behalf of social or environmental goals and its commercial performance. The term dates back to 2004 and it is oftentimes expressed through a numerical score. By evaluating a corporation or a fund in this way, proponents of ESGs hope to raise the cost of capital for polluting firms and encourage socially and environmentally friendly corporate behaviour.
Speaking on the Senate floor on Wednesday, Democrat leader Chuck Schumer accused Republicans of “forcing their own views down the throats of every company and every investor.”
The Republican battle against environmentally and socially conscious investing to Congress underscores the problems of a growing divide in the US government after Democrats lost control of the House of Representatives in last November’s midterm elections.
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