The ESG rule addresses what fiduciaries can consider when making plan investments and outlines that they may, but are not required to, consider ESG [environmental, social, and governance] factors when evaluating plan investments.
In addition to the 26 AGs, the plaintiffs included Liberty Energy, Inc., an energy company, and three individuals, while the defendant was then-DOL Secretary Marty Walsh.
Plaintiffs say that the department’s ESG rule undermines key protections for retirement savings and oversteps the department’s statutory authority under a 1974 law known as the Employee Retirement Income Security Act, which governs a broad range of retirement and health benefit plans.
The lawsuit claims the ESG rule is “arbitrary and capricious” and a violation of both ERISA and the Administrative Procedure Act.
U.S. District Judge Matthew Kacsmaryk threw out their lawsuit on Sept. 21.
'Neutral' ESG rule
The Labor Department's ESG rule bounced from the Trump administration to Biden’s. The final rule that went into effect Jan. 30 peeled off some of the provisions that opponents found objectionable, but not enough for the plaintiffs.
"They need to consider all relevant factors, and it merely says they may consider these ESG-related factors if they determine that they are relevant," he explained. "They still cannot sacrifice returns intentionally to achieve collateral objectives. They still can't increase risks on purpose to achieve collateral objectives. They have to invest for the economic interest of the workers and their retirement. So you have all the normal protections."
Congress in March passed a Republican-backed resolution to repeal the rule but Biden, a Democrat, vetoed it.
InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.