The Senate passed a bill that easily passed the House the day before, overturning a government regulation on ESG investments. This was the latest in a string of Republican attempts to stop what they refer to as “woke” financial decisions.
Democrats Joe Manchin of West Virginia and Jon Tester of Montana broke party ranks to back the legislation.
Joe Biden, the president, declared on Monday that he would veto the law if it came to his desk.
A Biden administration rule that permits retirement plans to take into account environmental, social, and corporate governance principles when making investment decisions was blocked by the GOP-controlled House on Tuesday.
“Yesterday night, the House rose and urged President Biden to refrain from involving politics in Americans’ retirement savings; this time, the Senate must do the same, “According to American for Prosperity’s vice president of government affairs, Akash Chougule, a conservative advocacy group.
A Labor Department rule permits the inclusion of ESG in retirement programmes
Retirement plans now find it simpler to take into account ESG variables like climate change according to a Labor Department rule that was implemented late last year. Environmental, social, and corporate governance concepts are referred to as ESG.
“Congress must take action to overturn the Biden administration’s recent regulation that permits so-called ESG investing in the retirement accounts of millions of Americans, “Rep. Andy Barr of the Kentucky GOP, who had introduced the measure, made this statement during Tuesday’s House floor discussion.
The vote in the House was 216-204. One Democrat sided with the opposition party.
“ESG opponents are trying to make it into a nasty acronym,” Senate Majority Leader Chuck Schumer said in a Wall Street Journal op-ed. “Republicans frequently mention their support for the free market, limited government, and empowering the private sector. Yet, their fixation with getting rid of ESG would have the exact opposite effect, shoving their own opinions down the throats of every investor and enterprise.”
What is the primary objective of ESG?
ESG is a type of investing approach that considers other aspects besides just the numbers.
Money managers who control $22 trillion in assets, including BlackRock, Vanguard, and State Street, have signed the UN Guidelines for Responsible Investment.
Although ESG is not well known outside of the investing community, it is quickly growing in popularity as a talking topic for the Republicans in the run-up to the 2024 presidential election.
ESG is it “woke”?
BlackRock and other asset managers are accused by Republican politicians throughout the nation of leveraging their clout to advance liberal policies and put pressure on businesses to cut emissions or appoint more diverse boards of directors.
Despite worries that doing so may be financially detrimental, red states from Texas to West Virginia have withdrew billions from BlackRock and other money managers.
As admirable as those objectives may be, they may not be solely driven by value maximisation, and many Americans who invest with those asset managers do not share their political views, according to Vivek Ramaswamy, co-founder of Strive Asset Management and a candidate for the Republican presidential nomination in 2024.
Large-scale investors disagree. BlackRock Senior Managing Director Dalia Blass stated, “We have one bias, and that’s to obtain the best risk-adjusted returns for our investors,” during a hearing before the Texas Senate’s Committee on State Affairs in December.
What are some instances of ESG?
ESG is viewed as a danger to the oil, gas, and coal industries, which is one of the reasons why this current front in the culture wars is becoming more heated.
Business sustainability initiatives frequently involve cutting back on fossil fuel use and minimising carbon footprints. Investors now take these initiatives into account when choosing which businesses to invest in, and this tendency is growing.
DeSantis leads the opposition against ESG
Florida Governor Ron DeSantis, a likely GOP candidate for president in 2024, is a leader in the anti-ESG campaign.
“CEOs can target topics like decreasing the usage of fossil fuels and curtailing Second Amendment rights by using shareholder assets under the guise of ESG. In his latest book, “The Courage to be Free: Florida’s Blueprint for American Renewal,” DeSantis argued that it is essentially a means for the political left to accomplish through corporate power what they are unable to do so through electoral means.”
