25 states hit Biden admin with lawsuit over climate action targeting Americans' retirement savings
The Biden administration's climate agenda is 'putting everyday people’s retirement money at risk,' Utah attorney general tells FOX Business
FIRST ON FOX: A group of 25 states on Thursday filed a federal lawsuit against the Biden administration, arguing a recent rule allowing retirement plan managers to factor environmental and social issues into investment decisions violated the law.
The lawsuit — led by Utah Attorney General Sean Reyes and joined by 24 other states including Louisiana, Texas and Virginia — challenges a Department of Labor (DOL) rule unveiled in November and which is set to go into effect on Jan. 30. The rule would open the door for fiduciaries to factor so-called environment, social and governance (ESG) considerations into Americans' retirement accounts, an action the states argued could significantly harm the financial interests of customers.
"The Biden administration is promoting its climate change agenda by putting everyday people’s retirement money at risk," Reyes told FOX Business in a statement. "Americans are already suffering from the current economic downturn."
"Permitting asset managers to direct hard-working Americans’ money to ESG investments puts trillions of dollars of retirement savings at risk in exchange for someone else’s political agenda," he continued. "We are acting with urgency on this case because this illegal rule is set to take effect next week. It must be stopped."
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The two dozen states filed the challenge in a federal district court in Texas and asked the court for a preliminary injunction to prevent the DOL from implementing the rule until a ruling had been issued in the case.
In the lawsuit, the states allege that the DOL violated the Employee Retirement Income Security Act (ERISA) of 1974. The law safeguards the retirement income of 152 million U.S. workers, equivalent to more than two-thirds of the nation's adult population, and covers roughly $12 trillion in assets.
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The states noted that ERISA requires retirement plan assets to be held for the exclusive purpose of providing benefits to participants in the plan and that the fiduciaries must act solely in the interest of said participants. The Supreme Court has previously ruled that such "benefits" are defined as "financial benefits."
After announcing the rule on Nov. 22, Labor Secretary Marty Walsh said the move would "help plan participants make the most of their retirement benefits." DOL Assistant Secretary for Employee Benefits Security Lisa Gomez added that climate change and ESG factors were important for investors.
"This is about protecting retirees in Louisiana and the rest of the country," Louisiana Attorney General Jeff Landry told FOX Business. "Investments should be made using sound economic principles, not woke policies. These firms have a responsibility to invest with their client's best financial interests in mind rather than Biden’s disastrous agenda."
Liberty Energy CEO Chris Wright, a private plaintiff in the case, added that his company was suing because the regulation "makes it harder to protect our workers’ retirement security and impedes investing in our industry and its ability to provide reliable and affordable energy to our communities."
"This rule is an affront to every American concerned about their retirement account," Texas Attorney General Ken Paxton said in a statement to FOX Business. "The fact that the Biden Administration is now opting to risk the financial security of working-class Americans to advance a woke political agenda is insulting and illegal."
"For generations, federal law has required that fiduciaries place their clients’ financial interests at the forefront, and I intend to fight the Biden Administration in court to ensure that they cannot put hard-working Americans’ retirement savings at risk," he added
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Over the past few years, massive asset managers and financial institutions have increasingly focused on prioritizing ESG factors when making key investment decisions. They have particularly set their sights on investing in companies based on those companies' efforts to combat climate change and curb their carbon footprints.
Companies like BlackRock, State Street and Vanguard, which collectively manage trillions of dollars in assets, have taken lead roles in the ESG movement.
In response to the growing movement, Republican state attorneys general and financial officers have fought back, canceling contracts with the firms and threatening legal action over how they handle customers' investments.
"Everyday Americans are having their investment dollars used against them as those in power favor a political agenda over financial returns," Derek Kreifels, CEO of the State Financial Officers Foundation, a group that has organized state and local opposition to the ESG movement, told FOX Business. "It is the actions like that of these attorneys general that will ensure Americans are safe from activist-investors and progressive elites who would rather focus on politics than upholding their fiduciary duty."
"Leaders at the state level, from treasurers to attorneys general, are sending a message to Wall Street and the administrative state that we will refuse to allow the American people to be taken advantage of and we will continue to fight to ensure their hard-earned dollars aren’t being used to push an agenda that runs counter to our values," Kreifels said.
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Will Hild, executive director of consumer group Consumers’ Research, also applauded the challenge, saying it was a significant action against the "left’s woke agenda."
"Attorney General Reyes is leading the way, highlighting how dangerous ESG is and why it is important for the states to stop [BlackRock CEO] Larry Fink and his ESG elitist friends from playing politics with the investments and retirements of hard-working Americans," Hild told FOX Business.
"As America’s oldest consumer protection agency, we will continue to support state officials in their efforts to protect the American people from the dangers of ESG and companies that are choosing politics over profits."
In addition to Utah, Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, South Carolina, Tennessee, Texas, Virginia, West Virginia and Wyoming all joined the lawsuit against the administration.
The Department of Labor didn't immediately respond to a request for comment.