Congress inflicts a setback on Joe Biden by banning the consideration of ESG criteria

Republicans baptized him “woke capitalism”, and some Democrats think no less. By 50 votes to 46, the US Senate voted on Wednesday 1er March, in favor of the abolition of a regulation of the federal ministry of labor authorizing the managers of individual pension funds, the famous 401 (k), to take into account in their investments the environmental, social and governance (ESG) criteria .

In a Senate where the Republicans have only 48 seats out of 100, they benefited from a few abstentions and two Democratic defections: that of Joe Manchin, senator from West Virginia, who had delayed Joe Biden for months by blocking until in the summer of 2022 its investment plan renamed Inflation Reduction Act. In 2024, he will face a difficult re-election in this coal-mining and conservative state. He was joined by Montana Senator Jon Tester, who finds himself in much the same situation.

In these two states, Donald Trump had won in 2020 with respectively 40 and 17 points ahead of Joe Biden. “At a time when working families are facing higher costs, from health care to housing, we need to ensure that Montana residents’ retirement savings are as strong as possible.explained Mr. Tester. I oppose this Biden administration rule because I think it undermines Montana workers’ pension funds and is bad for my state. »

“No benefit on investment”

The House with a Republican majority having already voted for this text, the law should quickly arrive on the desk of Joe Biden, who has already promised to veto it. It would be the first veto of the American president’s mandate. The executive strives to defend its regulations, pointing out that they “is not mandatory and does not require any manager to invest based solely on ESG criteria”. In fact, the Biden administration had simply reversed a regulation adopted under Donald Trump and barely entered into force, which made it very complicated to offer ESG funds.

This policy, consisting in particular of divestment from polluting energies, has proved difficult to defend in 2022: technological stocks have tumbled by a third, the large companies of the SP 500 have fallen by 20%. And only the energy companies triumphed, with a surge that year of 60%, against a backdrop of war in Ukraine and soaring oil prices. To ignore this sector in 2022 amounts to not holding Exxon and Chevron shares, and therefore to making retirees lose money, or even to not respecting their fiduciary duty.

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