President Biden has issued his first veto since taking office, turning down a bill that would have reversed a Labor Department rule on environmental, social and governance (ESG) investing. Originally proposed by the Biden Administration, the rule grants money managers the freedom to consider climate change and other ESG factors when making decisions for retirement investments on behalf of clients, replacing a rule from the Trump era that prohibited consideration of ESG factors.
The GOP-controlled house had passed the bill to undo the Biden rule and the Senate voted 50-46 to send the bill to Biden's desk. Two Senate Democratic senators, Sens. Joe Manchin (W.W. Va. Jon Tester (Mont. Republicans ) joined Republicans in opposing the Biden administration policy.
The White House argued that the rule is meant to ensure that retirement plan managers recognize that ESG factors are relevant in analyzing investment decisions. Biden vetoed the bill, stating it would "risk your retirement savings by making it illegal to consider risk factors the MAGA House Republicans don't like" and that the plan manager should be able to protect Americans’ hard-earned savings.
The veto has sparked a larger debate on ESG investing, with many conservatives opposing the practice. Supporters of ESG investment, however, argue that it allows people to make money, have a positive impact on the world around them and avoid some of the financial risks caused by climate change. Banks, investment firms and money managers also note that consumer demand for ESG investment offerings has steadily grown in recent years.
Congress is unlikely to be able to override Biden's veto, as it would require support from two-thirds of both chambers. Sen. Mike Braun (R-Ind. ) (R-K. Biden criticized Biden for "doubled down on prioritizing a progressive agenda over Americans'retirements and the will of Congress ", Sen. Joe Manchin (D - W. Va. ) called the decision "absolutely infuriating" and said the administration prioritised its "radical" and "progressive agenda" ahead of the country's needs. Sen. Patty Murray (Wash.) argued that those criticizing the rule had not “actually read the policy” and that the Biden rule was “fundamentally neutral on how the ESG factors are taken into consideration.” Sen. Joe Manchin III (W.Va. ) argued that the veto “will weaken our energy, national and economic security while jeopardizing the hard-earned retirement savings of 150 million West Virginians and Americans.”