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The Editors

ESG Investing Fight Is Less Than Meets the Eye

A Republican resolution to amend retirement-plan rules is more political than consequential. Still, Biden should veto it.

This could affect your investments.

This could affect your investments.

Photographer: Mario Tama/Getty Images

Congressional Republicans have fired yet another volley in their ongoing battle against environmentally and socially conscious investing. Although their effort to influence retirement-plan managers is more political than consequential, President Joe Biden is right to veto it.

At issue is the extent to which private-sector retirement plans, which hold some $12 trillion in assets, can explicitly consider environmental, social and governance issues in selecting investments. In late 2020, the Trump administration adopted a rule aimed at discouraging such behavior: It placed a greater burden on fiduciaries — the people who, say, oversee a company pension fund or 401(k) plan — to demonstrate that any ESG-related considerations were purely “pecuniary,” potentially exposing them to added litigation risk. Certain ESG choices, for example, would require extra documentation showing that they were economically indistinguishable from a non-ESG alternative.