House passes bill restricting ESG investments in retirement accounts

The House of Representatives passed a bill on Thursday to require plan sponsors to maximize returns as the highest priority over environmental, social, and governance (ESG) factors.

The Protecting Prudent Investment of Retirement Savings Act passed the House by a vote of 213-205. The bill was introduced by Rep. Rick W. Allen, R-Ga., chairman of the Subcommittee on Health, Employment, Labor, and Pensions, earlier this year.

"Passage of the Protecting Prudent Investment of Retirement Savings Act delivers a significant win for retirees and families across the country. Under the Biden-Harris Administration, Americans’ hard-earned savings were put at risk for the sole purpose of appeasing left-wing environmentalists through risky ESG funds," Allen said in a statement. "Those days are over. H.R. 2988 ensures that retirement plan sponsors make investment decisions exclusively based on economic factors and financial returns – protecting the retirement security of those saving for a brighter future."

The ESG issue has been batted back and forth through the Trump and Biden administrations. A group of Republican attorneys general sued in late 2023 to stop the Biden ESG rule from taking effect.

In mid-2025, the Trump administration Department of Labor decided to withdraw its defense and pursue new rulemaking to largely scrap the ESG framework, effectively ending the rule.

The Biden ESG rule – officially the Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights – allowed ERISA plan fiduciaries to consider ESG factors in retirement plan investments if they were relevant to a risk/return analysis.

The rule permitted but did not mandate ESG, emphasizing that any factor (including ESG) can be considered if it's reasonably determined to have a material impact on investment performance, without subordinating participants' financial interests.

The final rule was fairly "neutral," Brad Campbell, partner with Faegre Drinker Biddle & Reath, stated several times on various webinars. Campbell formerly served as assistant secretary of labor under President George W. Bush.

Sen. Bill Cassidy, R-La., introduced similar anti-ESG legislation in the Senate, mirroring the House bill. It was referred to the Senate Committee on Health, Education, Labor and Pensions, but it has yet to receive a vote.