Twenty-five attorneys general and several other plaintiffs have sued the Biden administration asking the court to halt a federal ESG policy that could negatively impact the retirement savings of 152 million Americans.
\nThe lawsuit was filed in U.S. District Court Northern District Amarillo Division naming Secretary of Labor Martin Walsh and the U.S. Department of Labor as defendants.
\nIt alleges the U.S. Department of Labor created a rule prioritizing \u201cwoke\u201d Environmental, Social, and Governance (ESG) investing that jeopardizes the retirement savings of 152 million workers, or two-thirds of the U.S. population.
\nLast November, the Department of Labor finalized a rule allowing companies to prioritize ESG policies when choosing retirement plans. It was the last phase of a nearly two-year effort to reverse a Trump-era rule banning the practice.
\nThe department said it was implementing the rule to \u201cremove barriers to plan fiduciaries\u2019 ability to consider climate change and other environmental, social and governance factors when they select investments and exercise shareholder rights.\u201d
\nIn response, Texas Comptroller Glenn Hegar said President Joe Biden was \u201cusing unelected bureaucrats \u2026 to push his radical ESG agenda, undermine the Texas economy and jeopardize our national security and energy independence.
\n\u201cEven as free market forces begin to erode the ESG fairy tale and expose the intellectual dishonesty and utter lack of transparency in this investment scam, President Biden is using the DOL rulemaking process to double down on policies that put his social agenda above the retirement needs of hard-working Americans.\u201d
\nLess than two months later, Texas Attorney General Ken Paxton sued, along with 24 other attorneys general.
\n\u201cBeyond being detrimental to the retirement accounts of hardworking Americans, the rule is fundamentally unlawful, as well as arbitrary and capricious,\u201d\u00a0 Paxton said, noting that it violates the Employee Retirement Income Security Act of 1974 (ERISA), created to protect retirement assets, and the Administrative Procedure Act.
\n\u201cThis rule is an affront to every American concerned about their retirement account,\u201d Paxton said. \u201cThe fact that the Biden Administration is now opting to risk the financial security of working-class Americans to advance a woke political agenda is insulting and illegal. For generations, federal law has required that fiduciaries place their clients\u2019 financial interests at the forefront, and I intend to fight the Biden Administration in court to ensure that they cannot put hard-working Americans\u2019 retirement savings at risk.\u201d
\nThe rule, \u201cPrudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,\u201d follows an executive order Biden issued last May. His order directed the federal government to implement policies \u201cto help safeguard the financial security of America\u2019s families, businesses and workers from climate-related financial risk that may threaten the life savings and pensions of U.S. workers and families.\u201d
\nThe rule change \u201cwill bolster the resilience of workers\u2019 retirement savings and pensions by removing the artificial impediments \u2013 and chilling effect on environmental, social and governance investments \u2013 caused by the prior administration\u2019s rules,\u201d Acting Assistant Secretary for the Employee Benefits Security Administration Ali Khawar said in a statement last fall. \u201cA principal idea underlying the proposal is that climate change and other ESG factors can be financially material and when they are, considering them will inevitably lead to better long-term risk-adjusted returns, protecting the retirement savings of America\u2019s workers.\u201d
\nNovember\u2019s notice followed a March 2021 and October 2021 announcement and included comments received from the public.
\nLast August, Hegar directed state agencies to divest from 350 individual investment funds and 10 financial companies that were prioritizing ESG, and particularly boycotting oil and natural gas companies, as part of their portfolio. Not long after, Gov. Greg Abbott told The Center Square that the directive was working. He said some of the companies on Texas\u2019 list were making an effort to get off of it.
\nFlorida Gov. Ron DeSantis has also taken action, including prohibiting the state\u2019s retirement fund from investing in funds that prioritize ESG.
\nCo-leading the lawsuit is Utah Attorney General Sean Reyes; joining them are the attorneys general representing the states of Louisiana, Alabama, Alaska, Arkansas, Florida, Georgia, Indiana, Idaho, Iowa, Kansas, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, South Carolina, Tennessee, West Virginia, Wyoming and the commonwealths of Virginia and Kentucky.
\nPlaintiffs also include Delaware-based Liberty Energy Inc. and its subsidiary, Texas-based Liberty Oilfield Services LLC, Western Energy Alliance, and James Copeland, a participant in a retirement plan subject to ERISA.<\/p>\n