US Senator introduces bill to bar fiduciaries from prioritising ESG over financial returns

October 4, 2024

US Senator Bill Cassidy has introduced a bill aimed at preventing fiduciaries from prioritising ESG factors over financial returns, directly challenging a Department of Labor (DOL) rule.

The Integrity in Fiduciary Duty Act aims to eliminate ESG ideology from retirement savings by requiring asset managements to choose investments solely based on financial returns.

The bill requires fiduciaries to evaluate an investment or investment course of action basely solely on monetary factors, prohibiting them from sacrificing investment returns or taking on additional risk to promote non-financial benefits or goals.

Cassidy said: “Asset managers should prioritise helping Americans achieve the best return for their retirement, not funnelling their clients’ money to fund a left-wing political ideology.,”

“This legislation protects 152 million Americans who depend on a strong retirement to live after their career is over.”

The legislation contests the Bidden-Harris administration’s 2022 DOL rule, ‘Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights’, which enables retirement plans to consider ESG factors in investment and shareholder rights decisions.

The bill received backlash as 25 Republican-led states filed a suit to invalidate the rule, however US President Biden responded by issuing his first veto to block their invalidation.

Cassidy, a member of the Senate Health, Education, Labor and Pensions Committee, also raised concerns about the DOL’s ESG rule, arguing that it could empower left-wing activists to incorporate boycott, divestment and sanctions policies into retirement plans.

This is the latest bill to restrict fiduciaries from considering ESG factors in their investments as Oklahoma advanced the Energy Discrimination Elimination Act, which prohibits state pension funds from investing in firms that use ESG criteria in their investment decision-making.

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.