Why Would Biden Veto Legislation That Would Protect Retirement Savings?

Photo edit of President Biden and Speaker of the House Kevin McCarthy. Credit: Alexander J. Williams III/Popacta.
Photo edit of President Biden and Speaker of the House Kevin McCarthy. Credit: Alexander J. Williams III/Popacta.

President Joe Biden has vetoed legislation that sought to overturn a Labor Department rule that permits retirement fiduciaries to invest according to environmental, social, and corporate governance (ESG) principles. The rule had been established in the previous year to protect the US economy from the potential financial risks caused by climate change. It permits fiduciaries to consider ESG factors as long as they are relevant to a risk-and-return analysis. The new rule had reversed a ban implemented under the Trump administration.

On March 15, 2023, McCarthy tweeted about the possibility of Biden using retirement savings to fund political activism and ESG regulation, stating that Biden’s new “woke” regulation could potentially use Americans’ retirement savings for such purposes. McCarthy also mentioned that Congress had already blocked the regulation, but President Biden was now threatening to veto it.

“Do you have a retirement plan through work? If so, you won’t like Biden’s new woke, ESG regulation, which could use your retirement savings to fund political activism.

The good news is Congress blocked it—but now the President is threatening to veto…”

In response, President Biden took to Twitter to announce his decision to veto the House Republicans’ bill, which he believed would put Americans’ retirement savings at risk by disallowing the consideration of certain risk factors that MAGA House Republicans do not approve of. Biden emphasized that Americans’ plan managers should have the ability to safeguard their hard-earned savings, regardless of whether Representative Marjorie Taylor Greene and her supporters agree with it or not.:

I just vetoed my first bill.

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.”

McCarthy commented on Biden’s decision, accusing him of siding with woke Wall Street over workers and supporting his far-left political causes by allowing Wall Street to use retirement savings for political activism:

Republicans, along with some Democrats, had passed a resolution to nullify the rule. The veto marks Biden’s first use of presidential power.

Biden said that the resolution would have required retirement managers to ignore significant risk factors, including physical risks posed by climate change and poor corporate governance. Such factors could impact investment returns and put the savings of working families and retirees in jeopardy.

The term “ESG” stands for “Environmental, Social, Governance,” and was coined in 2005. It has gained prominence over the past 18 years and is believed to provide a view of a company’s long-term value potential and relevance to stakeholders by measuring environmental and social impacts, as well as corporate governance effectiveness in managing them. Companies create ESG strategies to balance profits, people, and the planet. However, critics argue that the ESG movement mixes political and social causes, such as diversifying company leadership by race or gender, which may compromise profitability.

Analysis: “Woke” and “ESG” Are the New “Fake News”

Critics also point out that ESG funds underperformed last year, with tech companies, which ESG managers tend to favor, suffering in the stock market, while energy firms, which ESG managers tend to dislike, had outsized returns. Furthermore, the ESG movement has caused confusion and massive layoffs, disrupting the natural order of American culture and going against its founding ideals. Individuals without ESG skills risk losing their jobs, regardless of their other qualifications.

Republicans have welcomed the veto as a rebuke of the federal government’s endorsement of the ESG movement, arguing that it undermines economic freedom and harms American workers. However, American investors are largely skeptical of ESG investment strategies and prefer funds to be allocated in a politically neutral manner.

While senior officials in the Biden administration have promoted the tenets of the ESG movement in their various agencies, a Daily Wire poll found that 64% of respondents believed that individual investors should decide whether funds are appropriated according to ESG standards, while only 20% thought that Wall Street asset managers should make such decisions.

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