A coalition of Republican-led states is suing the US Labor Department to block an imminent rule change that will allow 401(k) managers to consider climate change and other environmental, social and governance (ESG) factors when selecting investments.
The coalition, led by Utah Attorney General Sean Reyes, argues the Labor Department rule violates federal law, would put trillions of dollars of retirement savings at risk and is being driven by political ideology.
The lawsuit was filed by 25 states, almost all of them led by a Republican governor. The two states led by Democrats, Kentucky and Louisiana, have Republican attorneys general.
The final rule, announced in November, is scheduled to take effect on January 30. The rule was aimed at removing restrictions imposed by the Trump administration by clarifying that retirement account managers can consider climate change and ESG factors when they select investments and exercise shareholder rights such as proxy voting.
“The Biden administration is promoting its climate change agenda by putting everyday people’s retirement money at risk,” Reyes said in a statement on Thursday. “We are acting with urgency on this case because this illegal rule is set to take effect next week. It must be stopped.”
The complaint alleges that the Labor Department ESG rule would “make it easier for fiduciaries to act with mixed motives” and “harder for beneficiaries to police such conduct.”
The Labor Department referred questions on the lawsuit to the Justice Department, which did not respond to a request for comment.
The 25 states in the lawsuit are: Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, Ohio, South Carolina, North Dakota, Tennessee, Texas, Utah, Virginia, West Virginia and Wyoming.