WASHINGTON, D.C. – This week, U.S. Senator Thom Tillis (R-NC) and 49 of his Senate colleagues introduced a bipartisan challenge to President Biden’s ESG rule which politicizes millions of Americans’ retirement investments to favor Biden’s ideological preferences rather than getting the best returns for Americans. In November, President Biden instituted a rule that explicitly permits ERISA retirement plan fiduciaries to consider environmental, social, and corporate governance (ESG) factors when selecting investments and exercising shareholder rights.
“This ESG rule proposed by the Biden Administration will financially punish millions of Americans by putting their retirement savings at risk,” said Senator Tillis. “Hard-working Americans have seen their retirement savings plummet due to the Biden Administration’s economic policies, and it is critical that fiduciaries prioritize maximizing returns as opposed to the ESG liberal agenda. I am proud to work with my colleagues to challenge this proposed rule, protect Americans’ hard-earned retirement savings, and hold the Biden Administration accountable for its out-of-touch liberal economic agenda.”
In November, President Biden instituted a rule that explicitly permits ERISA retirement plan fiduciaries to consider environmental, social, and corporate governance (ESG) factors when selecting investments and exercising shareholder rights.
This Biden rule replaces a previous rule which mandated fiduciary decisions be made solely on getting the best returns for the 152 million American workers that depend upon ERISA for their retirement. Because ERISA covers most employer-sponsored retirement plans, we’re talking about $11.7 trillion in assets here.
Under Biden’s rule, retirement fund managers can prioritize ESG factors instead of financial returns in their investment decisions for workers’ hard-earned savings. Plan participants could unknowingly be enrolled in ESG funds, which may not align with their political views. In the most recent survey, most Americans think it’s a bad idea for companies to use their financial influence to advance a political or social agenda, as is the case in ESG investing.
A number of studies have shown that ESG investing policies have worse rates of return. For example, a study by UCLA and NYU found that over the past five years ESG funds underperformed the broader market, averaging a 6.3% return compared to 8.9% return respectively. Additionally in comparison to other investment plans, ESG investors generally end up paying higher costs for worse performance.