A resolution to reverse a rule allowing U.S. pension investors to consider environmental, social and governance criteria has been blocked by President Joe Biden.
“It would put at risk the retirement savings of people across the country,” the president said after issuing his first-ever veto. Through the office’s veto power, a president may block any legislation. This can be reversed by a two-thirds super-majority vote in both houses.
If it had been allowed to pass, the resolution would have reversed regulation amending the Employee Retirement Income Security Act. The rule, implemented through an executive order in February, settled a longstanding issue about whether fiduciaries may consider ESG factors in investment decisions.
Read: A look at the latest legal issues around ESG investing
On Feb. 28, Congress passed the resolution in a 216-204 vote. Three days later, the Senate passed the bill in a 50-46 vote. All sitting Republicans voted in favour of its passage, joined by one congressional Democrat and two senate Democrats.
Biden’s decision to veto the resolution drew criticism from Joe Manchin, a Democratic senator for West Virginia. In a statement, Manchin, who had been one of the two senate Democrats to support the resolution, described the president’s move as “absolutely infuriating.”
“This administration continues to prioritize their radical policy agenda over the economic, energy and national security needs of our country and it is absolutely infuriating,” he said. “This ESG rule will weaken our energy, national and economic security, while jeopardizing the hard-earned retirement savings of 150 million West Virginians and Americans.”
Read: Report urges pension plan fiduciaries to focus on finance when considering ESG factors
The move isn’t the only effort by Republican politicians to prevent ESG factors from being considered in investment decisions. Last week, 19 Republican governors opposed the use of ESG criteria by institutional investors managing public funds or state pension plans.
In a statement co-signed by the governors, they announced their opposition to “ESG influences” in state pension fund investments. “Among other actions, this may include blocking the use of ESG in all investment decisions at the state and local level, ensuring that only financial factors are considered to maximize the return on investment, protecting retirees and taxpayers alike.”
Read: Florida introducing resolution barring ESG integration by state pension fund managers