“I have a pen that can veto.” When the Democrats lost control of the House of Representatives, the President of the United States was already making it clear that he would not go through the hoop of legislation he did not share. Because the Senate was relatively controlled, Joe Biden hasn’t had to use the veto pen until now, but it was released this Monday. The issue being vetoed has nothing to do with taxes, firearms, social security, abortion, immigration or any other big issue dominating US politics, but with sustainable investment criteria known as ESG (English initials for environmental, social and governance). . .
Republicans have declared war on sustainable investing and made it the battlefield of the Kulturkampf. Many of them believe that this is a way to backdoor the progressive agenda on issues like fighting climate change or equality. That’s why, with their majority in the House of Representatives and with the help of some dissident Democrats in the Senate, they passed a resolution that would allow pension fund managers to disregard ESG criteria when making decisions about their investments, under a rule issued by the Labor Department that the opposition wanted to overturn.
It was a more theoretical than practical dispute. The norm that the Republicans wanted to overturn does not force sustainability criteria to be taken into account, but simply allows it. On the other hand, when allocating assets, managers must be guided by the benefit of those involved, but no one holds them accountable for their decisions. If they believe that companies that adhere to sustainability criteria have a brighter future, they can invest in them. So even if the Department of Labor rule had been abolished, the practical effect would have been small.
Biden has returned the resolution he sent for signature to Congress without his approval. In the American system of checks and balances, the President can refuse to sign a law passed by Congress or a minor resolution (as in this case).
The president says the rule Republicans wanted to repeal “protects the life savings and hard-earned pensions of tens of millions of workers and retirees across the country.” “It enables pension plan trustees to make fully informed investment decisions by considering all relevant factors that may affect a potential investment, while ensuring that the investment decisions made by pension plan trustees maximize the financial returns for retirees,” he emphasizes in his communication to the House of Representatives expressing his veto.
Republicans argue that ESG criteria are what they derogatorily call awakened capitalism, and refer to those who are said to have woken up (woken up) to injustices and social problems and are preparing to fight them. They declared war on the guards, so they put sustained investments on the trigger. His accusation is that the profitability of those involved is being sacrificed in order to put other items on the progressive agenda.
Biden counters for this reason: He replies that there is ample evidence that environmental, social and governance factors can have a significant impact on markets, sectors and companies.
“The Republican-led resolution would force pension plan managers to ignore these relevant risk factors, disregard free market principles and jeopardize the life savings of working families and retirees. In fact, this resolution would prevent pension plan trustees from considering factors such as the physical risks of climate change and poor corporate governance that could hurt the profitability of investments,” the president says in his message, which he believes is how it should be be able to “consider every factor that maximizes the financial returns of retirees across the country”. “It’s not controversial, it’s common sense,” he concludes.
Biden stopped the coup on pension plans, but the fight continues on other fronts. More than a dozen red states are promoting anti-ESG laws that prevent public funds from being managed according to these criteria or from making bids on companies that use them in ways they deem discriminatory. Texas, for example, wants to use it to defend its powerful hydrocarbon sector.
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