US Labor Department considers overturning pension fund ESG rule 

April 24, 2025

The US Department of Labor has requested that the Fifth Circuit Court of Appeals suspend litigation over a Biden-era rule that allows pension funds to consider environmental, social and governance (ESG) factors. 

With federal agencies now operating under the Trump administration, a number of states have attempted to overturn the Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights rule, which enables retirement fund managers to take ESG factors into account in the case of a tiebreaker between two financially equal investment options. 

The rule means fiduciaries can consider ESG factors and other collateral benefits in cases where two or more investments “equally serve” the financial interests of the plan and investing in both or all the options is not preferred or practical.  

The motion was filed in an appeal by 26 Republican state attorney generals who have opposed the regulation since 2023. At that time, it was dismissed by Northern Texas District Court Judge Matthew Kacsmaryk based on the now-overturned Chevron doctrine, in which courts allowed agencies to decide how they interpret ambiguous statutes. 

However, the case remained on the Fifth Circuit’s docket and returned to the appeals court after a federal district court judge confirmed for a second time that the regulation was permissible under the 1974 Employment Retirement Income Security Act. 

The Labor Department, now under new leadership, said on Monday 21 April that a further suspension of the proceedings would “greatly conserve the litigants” and the court’s resources, and that rescinding the rules would avoid the need for litigation. 

Labor Department Attorney Daniel Winik wrote: “Now that its new leadership has had the requisite time to gain familiarity with the issues in this case, the Department has determined that it intends to reconsider the challenged rule, including by considering whether to rescind the rule.”  

Many experts had predicted that the Labor Department’s fiduciary rule was one of the ESG-related regulations most in danger of being revoked by the second Trump administration, while the Securities and Exchange Commission’s climate-risk disclosure rule could also be in danger. 

Minerva’s blog focuses on the latest developments in ESG investing and stewardship. Minerva is a global provider of sustainable stewardship solutions with over 25 years of expertise. Minerva empowers investors by providing essential tools, including ESG research and data, enabling them to navigate the intricate landscape of stewardship and proxy voting, whilst ensuring their decisions are well-informed and aligned with sustainable principles.

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