The Biden administration has called for a federal judge to dismiss a Republican state-led lawsuit seeking to shoot down a rule allowing employee retirement plans to make ESG-conscious investing decisions, according to media reports.
In a filing seen by Reuters, the U.S. Department of Justice argued the rule is needed to replace improper limitations that the former administration had placed on ESG considerations in investment decisions.
An alliance of 25 Republican states have brought the lawsuit calling for a ruling to permanently block the Biden administration’s rule, which took effect on January 30. The group has also argued that the rule would imperil the retirement savings of millions of Americans by allowing investments to be made based on political agendas rather than financial considerations.
The Biden administration has however said that the rule does state that retirement plans must base decisions primarily on financial factors, but unlike the previous government’s rule, it also is aware that ESG issues can impact companies’ long-term financial health.