More than two years into his Oval Office tenure, President Biden used his veto power for the first time to block a bill that proposed limiting the choices financial managers can consider when protecting the savings of their clients.
The limitation would have prohibited retirement plan managers from considering environmental, societal and governance (ESG) factors in making investment decisions, as a rule issued by the Labor Department had allowed.
Republicans largely don’t favor ESG considerations, with vituperative GOP ESG opponents like Florida Governor Ron DeSantis insisting ESG is part of a plot devised by the “woke mob” to hamstring pure capitalism.
[Note: ESG is portrayed by its opponents as a threat to purely profit-seeking capitalism as it elevates reputedly secondary business criteria like environmental impact and governance. Conversely, ESG proponents say a business that does not consider environmental impact is not preparing adequately for the future, a neglect that endangers its profitability. It is notable that many of those against allowing corporate governance to be considered an investment criteria are also among the loudest complainers when a bank fails due to a lack of adequate corporate governance.]
DeSantis is not alone in his anti-ESG stance: The bill passed the Senate 50-46.
With his veto, Biden said, “This bill would risk your retirement savings by making it illegal to consider risk factors MAGA House Republicans don’t like. Your plan manager should be able to protect your hard-earned savings—whether Rep. Marjorie Taylor Greene likes it or not.”
I just vetoed my first bill.— President Biden (@POTUS) March 20, 2023
This bill would risk your retirement savings by making it illegal to consider risk factors MAGA House Republicans don’t like.
Your plan manager should be able to protect your hard-earned savings — whether Rep. Marjorie Taylor Greene likes it or not. pic.twitter.com/PxuoJBdEee
Biden’s use of the Congresswoman from Georgia as a punchline drew a rebuke from Greene.
No one has put our retirement at risk more than you, Joe.— Rep. Marjorie Taylor Greene🇺🇸 (@RepMTG) March 20, 2023
American families can’t count on checks from China to pay their rent and groceries like your family does. https://t.co/rE9I4NSm18
The White House issued a statement saying: “There is extensive evidence showing that environmental, social, and governance factors can have a material impact on markets, industries, and businesses. But the Republican-led resolution would force retirement managers to ignore these relevant risk factors, disregarding the principles of free markets and jeopardizing the life savings of working families and retirees.”
The American consulting conglomerate McKinsey & Company, an unequivocal proponent of free market capitalism, has said both experience and research shows that ESG “links to cash flow in five important ways” –
(1) facilitating top-line growth, (2) reducing costs, (3) minimizing regulatory and legal interventions, (4) increasing employee productivity, and (5) optimizing investment and capital expendituresMcKinsey & Company
The White House veto doesn’t mean that financial advisors must consider ESG in their strategies, only that they are not prohibited from factoring ESG into their considerations.
“Retirement plan fiduciaries should be able to consider any factor that maximizes financial returns for retirees across the country,” the White House said. “That is not controversial—that is common sense.”
Republican Sen. Mike Braun, an author of the bill, criticized Biden’s veto on the grounds that it is unfair to allow investment managers to have access to all information available before making investment decisions.
“Today, President Biden used his first veto to reject a bipartisan majority consensus in the House and Senate that Americans’ retirement savings should be invested to get the best return, not to support a political agenda,” he wrote.