The House of Representatives on Thursday failed to override President Joe Biden’s first veto of his presidency, which was related to a Biden administration rule on environmental, social, and governance (ESG) investment.
The House vote of 219–200 in favor of overriding Biden’s veto fell short of the two-thirds majority threshold required. All Republicans who were present voted in favor of overriding the veto. Rep. Jared Golden (D-Maine) was the lone Democrat who joined them in the vote.
Biden’s veto, issued March 20, rejected a resolution introduced by Rep. Andy Barr (R-Ky.) to rescind a Department of Labor (DOL) rule that went into effect on Jan. 30. The resolution, whose companion bill was led by Sen. Mike Braun (R-Ind.), passed the House and Senate via simple majority votes.
The DOL rule allows pension fund managers to invest people’s retirement money according to various ESG criteria. It replaces a previous rule issued under the Trump administration in 2020 that required fund managers to make investments only based on financial considerations.
The Biden administration rule affects the pensions of 152 million Americans, which amount to some $12 trillion.
“House Democrats just overwhelmingly doubled down in defense of Biden’s radical ESG regulation,” House Speaker Kevin McCarthy (R-Calif.) said in a statement on Twitter on Thursday in response to the failed veto override.
“House Republicans have different priorities: your retirement savings should NOT be used to fund political activism,” he added. “We’ll continue to fight for American workers over woke Wall Street.”
Barr, who introduced the anti-ESG measure, on Thursday shared a Twitter post from Rep. John Rose (R-Tenn.): “@HouseGOP is sending a message to President Biden: we stand with hard-working, middle-class Americans over woke, special interest groups.
“Americans’ retirement accounts should be protected from left-wing lunacy. @RepAndyBarr is leading this effort and I’m 100% supportive—for the financial security of Tennesseans.”
ESG is a voluntary activity companies can pursue. The non-financial criteria are measured by external, third-party providers. Companies deemed to better meet ESG criteria may be allotted more capital and credit, and preferential contracting, by financial institutions subscribed to the ESG agenda.
Supporters of ESG say such criteria can guide companies to reflect changing trends and benefit their employees and society at large in non-financial ways.
But those opposed to ESG say that it amounts to something like a social credit score that shifts investing from focusing on revenue, investor returns, and the quality of goods and services, to focusing on arbitrary and subjective goals that seek to achieve political and social justice causes, sometimes at the expense of financial returns.
Many Republican and some Democrat lawmakers have said the DOL rule would politicize investing and allow pension fund managers to risk Americans’ hard-earned dollars to pursue leftist causes that have nothing to do with finances, including climate change and gender diversity.
Prior to Biden’s veto, the Democrats who voted with Republicans to rescind the DOL rule were Rep. Golden, and Sens. Jon Tester (D-Mont.) and Joe Manchin (D-W.Va.).
Other Democrats say that the rule would just allow the fund managers to acknowledge ESG criteria as relevant to analyzing their investments.
“This bill would risk your retirement savings by making it illegal to consider risk factors MAGA House Republicans don’t like,” Biden previously said on Twitter in announcing his veto. Biden said in a White House statement that the rule “protects the hard-earned life savings and pensions of tens of millions of workers and retirees across the country.”
“This ESG rule will weaken our energy, national, and economic security while jeopardizing the hard-earned retirement savings of 150 million West Virginians and Americans,” Manchin had said after Biden’s veto. “Despite a clear and bipartisan rejection of the rule from Congress, President Biden is choosing to put his administration’s progressive agenda above the well-being of the American people.”
Barr previously told the House floor that ESG funds carry higher fees and are less diversified than non-ESG funds. “Twenty-one percent of investors don’t even know what ESG stands for,” he said.
Savannah Pointer contributed to this report.