ESG Investing Fight Is Less Than Meets the Eye

Congressional Republicans have fired yet another volley in their ongoing battle against environmentally and socially conscious investing. Although their effort to influence retirement-plan managers is more political than consequential, President Joe Biden is right to veto it.

At issue is the extent to which private-sector retirement plans, which hold some $12 trillion in assets, can explicitly consider environmental, social and governance issues in selecting investments. In late 2020, the Trump administration adopted a rule aimed at discouraging such behavior: It placed a greater burden on fiduciaries — the people who, say, oversee a company pension fund or 401(k) plan — to demonstrate that any ESG-related considerations were purely “pecuniary,” potentially exposing them to added litigation risk. Certain ESG choices, for example, would require extra documentation showing that they were economically indistinguishable from a non-ESG alternative.