The Labor Department's (DOL's) rule on environmental, social, and corporate governance (ESG) investing, which took effect on January 30, 2023, ended a Trump-era ban preventing retirement investment managers from considering ESG factors in their investment decisions. Earlier this month, 26 Republican-led states argued to a federal appellate panel that the rule should be overturned.
But since the U.S. Supreme Court overturned Chevron deference on June 28, limiting federal agencies' ability to interpret laws and impose regulations where Congressional statutes are ambiguous, the appeals court sent the case around the ESG rule back to the Texas district court where it originated.
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"Given the up-ended legal landscape, and our status as a court of review … we vacate and remand so that the district court can reassess," said the appellate court.
Now the Texas Northern District Court will hear the DOL's current rule, which allows retirement fund managers to consider ESG factors, without consideration of Chevron deference. Two energy companies have joined the 26 attorneys general arguing against the rule.
The Chevron doctrine, so-called for its establishment in a 1984 Supreme Court decision, required that federal courts be deferential to federal agencies' interpretations of ambiguous language. However, on June 28, another landmark Supreme Court ruling—Loper Bright Enterprises v. Raimondo, Secretary of Commerce—determined that the Chevron doctrine no longer applies to cases involving rulemaking by the federal government.
The DOL rule has been challenged ever since it took effect. Shortly after the DOL's Employee Benefits Security Administration finalized it, the GOP attorneys general filed their lawsuit. In March of 2023, the House and Senate voted to block the sustainable investing rule, which was then vetoed by President Biden—the first veto of his presidency.
From: BenefitsPRO
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
