Biden’s ESG Tax on Your Retirement Fund
A Labor Department rule would push fiduciaries to favor climate policies over the interests of investors.
By Vivek Ramaswamy and Alex Acosta, July 19, 2022
BlackRock CEO Larry Fink wrote in 2020 that “sustainable investing is the strongest foundation for client portfolios.” Al Gore said in 2021 that “you don’t have to trade values for value. Green can enhance returns.” These claims haven’t aged well: ESG (environmental, social and governance) funds have trailed the market since the beginning of the year and are badly underperforming the sectors they shun, including oil, gas and coal.
That may spur retirement fund managers to reconsider their commitments to ESG funds. But new ESG-favoring regulations may come to the rescue. Last year the U.S. Labor Department proposed a regulation that would tell retirement-fund managers to consider ESG factors such as “climate change” and “collateral benefits other than investment returns” when investing employees’ money.
This would encourage America’s perpetually underfunded pension plans to invest in politically correct but unproven ESG strategies. It would also violate retirees’ basic right to have their money invested solely to advance their financial interests.
Retirement and pension-fund managers are fiduciaries, legally required to make every investment decision with one purpose—maximizing retirees’ financial interests. The Uniform Prudent Investor Act, a model law adopted by 44 states, makes clear that “no form of so-called ‘social investing’ ” is lawful “if the investment activity entails sacrificing the interests of . . . beneficiaries . . . in favor of the interests . . . supposedly benefitted by pursuing the particular social cause.” This principle is built into the Employee Retirement Income Security Act itself, as the Supreme Court held in Fifth Third Bancorp v. Dudenhoeffer (2014). The Biden administration can’t change that by regulation.