US Judge rejects Republican challenge to Biden's ESG investment rule
A federal judge in Texas upheld a rule that was adopted by Democratic former president Joe Biden that allowed socially conscious investments by employee retirement plans. The judge said it remained valid after a U.S. Supreme Court decision that curbed the regulatory powers of agencies.
U.S. District Court Judge Matthew Kacsmaryk, in Amarillo Texas, has rejected the arguments of 26 Republican-led States, oil drilling company Liberty Energy, and an oil and Gas trade group, that this rule is inconsistent with federal laws.
The U.S. Department of Labor adopted the rule in 2022, allowing 401(k), and other plans, to use environmental, social and corporate governance factors (ESGs) as a "tiebreaker", between two or more financial equal investment options.
The rule replaced one adopted by Donald Trump during his first term as president, which prohibited plans from taking into account non-financial aspects. Trump's administration will likely revisit the rule.
Kacsmaryk has been appointed by Trump during his first term.
The states argued the 2022 rule was in violation of the Employee Retirement Income Securities Act of 1974 (ERISA), which requires retirement plan administrators act only in the interests of plan participants.
Republican-led states claimed that they did this by allowing plans to take into account non-financial aspects. The rule, they said, would put millions of Americans' retirement funds at risk if it were to remain in place.
Kacsmaryk rejected these arguments in September of 2023.
A federal appeals court ordered him to reconsider in July after the conservative majority U.S. Supreme Court scrapped in June a 40-year old legal doctrine called "Chevron Deference", which required courts to give deference to agencies' interpretations on ambiguous laws that they administered.
The Supreme Court stated that courts should not defer to the interpretations of agencies of ambiguous laws, but instead "must exercise an independent judgment when deciding whether or not an agency has acted in its statutory authority."
Kacsmaryk concluded in his Friday decision that "the rule does not violate ERISA when analyzed post-Chevron," and that arguments to the contrary amounted to "wooden textualism, which courts should avoid."
Reps from the Republican-led state and the Labor Department have not responded to requests for comment. (Reporting and editing by Stephen Coates in Boston, with Nate Raymond reporting from Boston)
(source: Reuters)
