The anti-ESG movement’s strategies are playing out on the national stage after being tested at the state level in years past. H.R. 2988, or the “Protecting Prudent Investment of Retirement Savings Act,” has passed the US House of Representatives and now goes to the Senate for consideration. If passed, the law will limit how retirement plans can consider ESG factors. The bill was introduced by a Representative from Georgia who states in a press release:
“This legislation aims to codify that those managing other individuals’ retirement savings under the Employee Retirement Income Security Act (ERISA) must prioritize maximizing returns for a secure retirement, rather than prioritizing political or social impacts through the use of environmental, social, and governance (ESG) factors that may be considered risky.”
Anyone familiar with ESG investing will immediately recognize the irony of this statement. Consideration of ESG factors is an investment strategy that helps make investments less risky, not more. This development underlines a point we’ve long made on the Practical ESG blog: Tying ESG programs to your business case is critical. Making the connection between cost avoided/value added and ESG not only helps your program win over allies internally but also helps defend against accusations of mismanagement from the anti-ESG crowd. We’ll have to see how H.R. 2988 fares in the Senate, but we should expect to see more attempts to create national laws mirroring state-level anti-ESG initiatives.
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