The Senate voted to overturn the retirement investment rule

Can Congress overturn the investment rule? The GOP-controlled Senate meets with the Congressional Review Act and Senate Select Committee on Minority Causality

Most legislation passed by the current GOP-controlled House will not be able to pass the Democratic-controlled Senate. But the resolution to overturn the investment rule only needed a simple majority to pass in the Senate. It was advanced under the Congressional Review Act, which gives Congress the ability to roll back regulations in the executive branch without requiring the 60-vote threshold in the Senate for most legislation.

Opponents of the rule have argued that it politicizes retirement investments and that the Biden administration is using it as a way to promote a liberal agenda.

Opponents of the rule could attempt to overturn Biden’s veto, but it’s not likely they’ll get the two-thirds majority needed to do so.

At this point, it appears unlikely opponents could get the two-thirds majority needed for an override of a veto.

The resolution, authored by GOP Sen. Mike Braun of Indiana, only needed a simple majority to pass. It passed on a vote of 50 to 46 with Democratic Sens. Joe Manchin of West Virginia and Jon Tester of Montana voting with Republicans.

It was advanced under the Congressional Review Act, which allows congress to overturn regulations when they don’t have to clear the 60-vote hurdle in the Senate for most legislation.

“The Biden Administration wants to let Wall Street use workers’ hard-earned savings to pursue left-wing political initiatives,” Senate GOP leader Mitch McConnell said in remarks on the Senate floor on Tuesday morning.

The Department of Labor has created new regulations on retirement funds that require them to be invested in things that are consistent with their interests, according to John Barrasso of Wyoming.

The supporters of the rule claim that it is not a mandate because it allows but does not require consider environmental, social and governance factors in investment selection.

Senate Majority Leader Chuck Schumer said on Wednesday that Republicans were using the same tired attacks that had been heard before. Republicans are missing a point about the Labor Department rule.

The 2022 Rule for Retirement Funds: A State of the Art and a Demonstration of “Awoke Capitalism”

“This isn’t about ideological preference, it’s about looking at the biggest picture possible for investments to minimize risk and maximize returns,” he said, noting it’s a narrow rule that is “literally allowing the free market to do its work.”

The statement of administration policy saying that Biden would veto the measure similarly states, “the 2022 rule is not a mandate – it does not require any fiduciary to make investment decisions based solely on ESG factors. The rule simply makes sure that retirement plan fiduciaries must engage in a risk and return analysis of their investment decisions and recognizes that these factors can be relevant to that analysis.”

The Republicans are trying to get a bill through the Senate that would repeal Washington DC’s crime law, which critics argue is soft on criminals.

Many Democrats oppose overriding the DC law. Local officials are supposed to make their own laws free from federal interference, and Republicans should be denounced for being hypocrites since they promote state and local rights.

President Biden just issued the first veto of his presidency over Republican legislation that aims to limit retirement fund managers from incorporating environmental, social and governance factors into their financial analysis.

Republicans are against “woke capitalism” and it is something both parties and all investors should support.

Biden’s veto supports free markets in the hard work of analyzing the long-term determinants of financial performance, including both traditional financial information like sales growth, cost margins and productivity, as well as information related to environmental factors like carbon emissions, social factors like labor practices and governance factors like transparency in reporting.

The Taxes and Benefits of Taking Environmental, Social and Governance into Account: Why Investments Should Not Be Be Fooled in Term “ESG”

In 2004, the term “ESG” was introduced to differentiate a group of investors who had no desire to be socially responsible but believed that factors such as ethics and values were related to financial performance in the long term. Put simply, ESG investing just means considering environmental, social and governance factors alongside more traditional financial data in assessments of long-term financial performance.

There is nothing political about the logic here. The value of some assets depends, for instance, on the degree of global warming or our success in transitioning to clean energy. Consider the value of a deep-water oil field or coal mine in which investment today is only profitable if demand for fossil fuels in 2050 is supported by a large fleet of fossil fuel vehicles and coal-burning power plants.

If battery-powered vehicles make up the majority of the North American fleet in 40 years, there will be a new battery plant that will only earn a return. Investment in a processing facility or battery plant that services fossil fuel vehicles will not make sense if that is the case.

In each of these cases, environmental factors and their evolution over time alter the expected value of an investment. If you voted Republican in the last election, you should want your retirement investment to take into account not only your politics, but also your behavior over the years as well.

Similar arguments can be made for incorporating the likely cost of air or water pollution regulation, human rights lawsuits, minimum wage legislation and anti-money laundering restrictions into forecasts of companies’ earnings and relative performance. In each case, future revenues, costs and productivity are impacted by environmental, social or governance factors.

Forbidding pension fund managers from incorporating it into their analysis would be akin to forbidding them from considering the impact of artificial intelligence, the Russian invasion of Ukraine or the growing US-China geopolitical rivalry. Asset managers should be able to analyze the factors without government supervision, since each could be financially material, if they so choose.

It is counter-productive for investment managers to not follow ESG strategies when more and more are convinced by the underlying logic. It would make it difficult for investors to have access to the best asset managers. Wharton finance professors have found that ignoring this progress and adhering to Republican legislative proposals to invest only with asset managers not making these efforts would cost taxpayers millions, while separate reports found it would cost investors and pensioners in Indiana and Kansas billions. The process of defining what would and wouldn’t be banned would lead to political chicanery, lobbying and other influence strategies that would depress returns.