26 State Attorneys General Appeal Biden ESG Rule

26 State Attorneys General Appeal Biden ESG Rule

January 19, 2024, Plan Sponsor

Jason Levy’s commentary was included in a Plan Sponsor article covering an appeal by a group of 26 Republican attorneys general in their legal challenge to a Department of Labor rule that permits environmental, social and governance factors to be considered when selecting retirement plan investments. Jason explained the arguments made by Covington in an amicus brief urging the district court to reject the initial complaint.

“With respect to the appeal, it’s not entirely clear to what extent the plaintiffs are challenging the fundamental holding from the district court that the main provisions in both rules are faithful to ERISA and Supreme Court precedent, in allowing consideration of ESG factors solely for the purpose of maximizing a financial return,” Jason said.

He added that “the appeal is really focused on an aspect of both the Trump and Biden rule that has very, very little practical significance: the tiebreaker rule,” Levy adds. “As an initial matter, both the Trump and the Biden tiebreaker rules do not have meaningful daylight between the two of them, and we think the district court got it right in acknowledging that there is no meaningful difference between the two tiebreaker rules. They both would allow a fiduciary to take into account nonfinancial collateral purposes only to break a tie between two competing investments.”