President Biden Issues First Veto to Protect ESG Investing
Today, President Biden issued the first veto of his presidency. This action had been heavily telegraphed in advance and was widely expected. Nonetheless, this veto is extraordinarily significant.
President Biden has now blocked a Republican effort to overturn a federal Department of Labor rule that enables investment managers to incorporate ESG factors--including climate change--into their investment decisions. As President Biden stated on Twitter, the bill he vetoed "would risk your retirement savings by making it illegal to consider risk factors MAGA House Republicans don't like." President Biden has now issued a clear policy statement that his administration approves of utilizing ESG factors in making investments. Such a position indicates that President Biden perceives ESG investing not only as significant itself, but also as a political fight in which the Democratic Party has an advantage over Republicans. That attitude implies that future activity in this space--such as the SEC's oft-delayed rule on climate disclosures--will likely receive additional impetus to come to fruition.
This decision by President Biden will also provide encouragement and reinforcement to the various businesses and public figures that have been promoting ESG investing, some of whom have engaged in this practice for many years. And while dissent certainly exists, including from "[o]fficials in Republican-led states [who] have argued that the rule will lead to disinvestment in fossil fuel companies that provide tax revenue and jobs in their states," some of whom have launched lawsuits to overturn the DOL rule, for the moment the ability of investment managers to consider ESG factors when making investments has been made secure by President Biden.
President Biden issued the first veto of his presidency on Monday, turning back a Republican effort to bar investment managers from incorporating climate and social considerations into their decisions. The rule that the president vowed to protect is an obscure investing principle known as E.S.G. — shorthand for prioritizing environmental, social and governance factors. It had been a widely accepted norm in financial circles for almost 20 years until Republicans recently started assailing it as “woke capitalism” that injected Democratic and liberal values into financial decisions. More than $18 trillion is held in investment funds that follow E.S.G. principles.
https://www.nytimes.com/2023/03/20/us/politics/biden-first-veto-esg.html
