Earlier this month, Representative Greg Murphy reintroduced an amended measure in Congress that would prevent retirement plan trustees from investing in environmental, social and governance (“ESG”) on behalf of participants and beneficiaries. The measure, which was advanced to the House Ways & Means Committee, was cosponsored by Reps. Beth Van Duyne, Claudia Tenney and Mike Kelly.
In a statement, Murphy explained that tax-advantaged retirement plans helped people save for their retirement and therefore needed to be managed in a way that would bring in the most returns instead of investing in risky ventures. He noted that unstable investments could be pursued independently but not with funds from millions awaiting retirement.
This is the second time Murphy has introduced this measure; he initially introduced it in October 2022.
The amended version of HR 7780 would also modify the Internal Revenue Code to stipulate that fiduciaries can only ponder risk and return factors when making investments decisions for defined contribution plans. It also states that the banned transaction provisions would exclusively be administered by a designate of the secretary or the secretary of the Treasury.
Rep. Jason Smith, chair of the aforementioned committee, stated that Congress needed to assess ways to strengthen safeguards that protected individuals from uncertain ESG investments that threaten their retirement. The committee first had a hearing on the ESG matter last year, during which members discussed ESG use in retirement plan investment.
During the four-hour hearing, various witnesses took the stand, including Life:Powered director Preston Rutledge, founder of frincipal of the Rutledge Policy Group; senior VP of First Bank & Trust, Mason Bolay; Office of Investment deputy director at AFL-CIO, Brandon Rees; and Utah state treasurer Marlo Oaks.
In other news, the labor department responded to a lawsuit filed by more than 12 GOP attorney generals who were challenging a ruling made by a lower district court to uphold the department of labor’s rulemaking. In its brief, the department reiterated that ERISA authorized fiduciaries to take into account collateral factors when making decisions on investments that serve the plan’s financial interests.
This comes after the district court for the Northern District of Texas ruled in favor of the plaintiffs, noting in their statement that the labor department wasn’t violating federal benefits law or exceeding its regulatory limits.
A number of initiatives seeking to endorse ESG investing in retirement plans or restrict it have been introduced in both the Senate and the House of Representatives.
This negative response to ESG doesn’t seem to be discouraging businesses such as Reflex Advanced Materials Corp. (CSE: RFLX) (OTCQB: RFLXF) from moving forward with their implementation of the principles espoused by the ESG movement.
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