Defined Contribution

President Biden Vetoes Congressional Bill to Overturn ESG and Proxy Voting Rule

Biden Vetoes Bill to Overturn ESG and Proxy Voting Rule
clock
1 min 25 sec

On March 20, 2023, President Biden vetoed legislation that would have blocked the enactment of the U.S. Department of Labor (DOL) final rule released on Nov. 22, 2022. Commonly known as the ESG rule, it clarifies fiduciary responsibilities under the Employee Retirement Income Security Act (ERISA) for selecting investments and exercising shareholder rights such as proxy voting.

Background About the Bill

Congress passed a joint resolution to overturn the DOL rule, titled “Final Rule on Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” which came into effect on Jan. 30, 2023.

The Congressional Review Act allows Congress to overturn a final rule by a federal agency in the first 60 legislative days after the rule comes into effect. The bill to overturn the Final Rule passed largely along party lines, with Republicans supporting the bill and Democrats opposing it in the House 216-204, and Senator Joe Manchin (D-West Virginia) and Senator Jon Tester (D-Montana) joining Republicans to oppose the rule in the Senate. Republicans argued that the rule placed advancing a political agenda ahead of the goal of maximizing risk-return to ensure the retirement savings of American workers.

Overriding Biden’s veto requires two-third’s majority voted in the House and Senate, which is unlikely.

Bottom Line

In the face of political challenges, the DOL, including Assistant Secretary for Employee Benefits Security Lisa Gomez, has repeatedly stated that the Final Rule does not prescribe that ESG factors must be considered and has the intent of being neutral on ESG consideration and integration in ERISA plan investments. Moreover, the bedrock principles of the duties of prudence and loyalty to plan participants and beneficiaries remain unchanged.

The topic of ESG is increasingly politicized at the federal and state political levels, and legal challenges to the Final Rule remain, including a lawsuit from 25 Republican state attorneys general. Callan will continue to follow emerging guidance on the Final Rule on behalf of our clients.

Prior ESG Insights on Final Rule

Final Fact Sheet

Final Rule

Disclosures

The Callan Institute (the “Institute”) is, and will be, the sole owner and copyright holder of all material prepared or developed by the Institute. No party has the right to reproduce, revise, resell, disseminate externally, disseminate to any affiliate firms, or post on internal websites any part of any material prepared or developed by the Institute, without the Institute’s permission. Institute clients only have the right to utilize such material internally in their business.

Posted by

Share
Share on facebook
Share on twitter
Share on linkedin
Related Posts
ESG

Interest in ESG Stays Level, Exclusive Callan Survey Finds

Hannah Vieira
Callan experts explain the results of the 2024 ESG Survey.
Operations

Offering Employees Choice: DC, HSA/HRA, or Student Loan Repayments

Jana Steele
Callan DC plan expert explains the implications of a new IRS private letter ruling.
Operations

A Guide to Sequence-of-Returns Risk for TDF Glidepaths

Kevin Machiz
An explanation of how public DB plans can use sequence-of-returns risk analysis.
Operations

The Newest and Final 'Fiduciary Rule'

Jana Steele
What the Department of Labor's Final Fiduciary Rule means for DC plan sponsors.
Operations

Callan 2024 DC Trends Survey: Focus on Plan Governance, and Continued Efforts to Rein in Fees

Jamie McAllister
A summary of Callan's 2024 Defined Contribution Trends Survey.
ESG

SEC Releases Final Climate Disclosure Rules

Kristin Bradbury
An explanation of the final SEC climate disclosure rules and what they mean for institutional investors.
ESG

The Heat Is On! Carbon-Footprinting Basics for Institutional Investors

Amit Bansal
Amit Bansal explains what carbon-footprinting means for institutional investors.
ESG

Callan Study Examines ESG Practices by Investment Managers

Kristin Bradbury
Kristin Bradbury summarizes our 2023 Asset Manager ESG Study.
Operations

IRS Announces Updated Retirement Plan Limits for 2024

Jamie McAllister
Jamie McAllister details the 2024 DC plan limits.
Operations

Key Issues to Know for the Proposed Fiduciary Rule

Jana Steele
Jana Steele explains what the new proposed fiduciary rule means for DC plan sponsors.

Callan Family Office

You are now leaving Callan LLC’s website and going to Callan Family Office’s website. Callan Family Office is not affiliated with Callan LLC.  Callan LLC has licensed the Callan® trademark to Callan Family Office for use in providing investment advisory services to ultra-high net worth clients, family foundations, and endowments. Callan Family Office and Callan LLC are independent, unaffiliated investment advisory firms separately registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940.

Callan LLC is not responsible for the services and content on Callan Family Office’s website. Inclusion of this link does not constitute or imply an endorsement, sponsorship, or recommendation by Callan LLC of their website, or its contents, and Callan LLC is not responsible or liable for your use of it. When visiting their website, you are subject to Callan Family Office’s terms of use and privacy policies.