The Biden administration’s woke Environmental, Social and Corporate Governance (ESG) policies are putting politics ahead of people and hurting retirees savings, a federal lawsuit filed Tuesday alleges.
The complaint, filed by the Wisconsin Institute for Law & Liberty (WILL) on behalf of two Waukesha County residents, seeks a temporary restraining order prohibiting the U.S. Department of Labor from implementing its controversial ESG rule, pending the resolution of the lawsuit. Ultimately, the suit seems a declamatory judgment that the rule violates federal law on administrative powers.
WILL, a Milwaukee-based public interest law firm, asserts the fundamental principle that retirement investments are for the benefit of retirees is “now under attack via the guise of an investing fad…” ESG’s set of standards for a company’s behavior is used by woke investors in screening potential investments. As the lawsuit argues, ESG focuses on liberal philosophical goals rather than maximizing investment returns.
The Biden administration likes to refer to it ESG as sustainable investing, socially responsible investing, and impact investing.
“Whatever euphemism one wishes to use … the ESG investment trend contemplates a focus on policy objectives rather than financial returns,” the lawsuit sates.
But the Employment Retirement Income Security Act of 1974 (ERISA) forbids such practices. The comprehensive federal law governs the operation of retirement plans and protects the hard-earned savings of millions of employees from mismanagement and abuse. The law also imposes important fiduciary duties on those who administer retirement plans.
Some 141 million workers and beneficiaries benefit from the protections afforded by ERISA, according to the U.S. Department of Labor. A majority of American workers, about 54 percent, earn retirement benefits on the job.
“Any alterations to the implementing of regulations by the Secretary of Labor (“Secretary”) can thus have a substantial effect on the retirement savings of tens of millions of workers and beneficiaries all over the country who have assets invested in qualified ERISA plans,” the lawsuit states.
In December, Labor Secretary Marty Walsh promulgated the Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights rule, commonly referred to at the ESG Rule. It permits and encourages plan administrators to consider environmental, social, and governance factors when making investments on behalf of plan beneficiaries.
The rule was born of a broader Biden initiative aiming to fight climate change through rulemaking, going around congress.
As the plaintiffs note, congress never granted President Joe Biden the authority to override ERISA’s text and its stated objective to protect retirees “in favor of progressive policy dreams like social credit scores, reducing pay for CEOs, or instituting racial quotas for corporate boards.”
“The ESG Rule violates ERISA and exceeds the authority granted to the Secretary by statute,” states the complaint, filed in the U.S. District Court, Eastern District of Wisconsin-Milwaukee Division.
Additionally, the lawsuit alleges the rule unlawfully politicizes the retirement system and, in doing so, puts the retirement savings of millions of Americans at substantial risk in service of a policy choice not found in ERISA or otherwise enacted by Congress.
Plaintiff Rick Braun, Operations Manager for SWAT Environmental, a soil, water, and air technologies company that provides radon mitigation and other services, is a participant in a qualified defined contribution benefit plan offered by his employer.
“I have been financially responsible, saving to have a future. Now it’s all at risk because politicians in Washington want to gamble it away on their favorite pet projects and causes,” Braun said in a statement.
A Department of Labor spokesman did not immediately respond to The Wisconsin Daily Star’s request for comment.
U.S. Rep. Bryan Steil (R-WI-01) has introduced the Putting Investors First Act, requiring proxy advisory firms with substantial sway over retirement funds to open their books on business practices. The bill aims to shed light on how the two major proxy advisors, Institutional Shareholder Services, Inc. (ISS) and Glass, Lewis & Co. (Glass Lewis), pressure public companies to engage in issues outside of financial performance and beyond the mission of improving shareholder value.
– – –
M.D. Kittle is the National Political Editor for The Star News Network.
Photo “Joe Biden” by Joe Biden.