[co-author: Stephanie Kozol]
On February 22, Texas Attorney General Ken Paxton (R) moved for a preliminary injunction as a next step after previously filing a multistate lawsuit against the Biden administration to stop a new Department of Labor (DOL) rule that allegedly prioritizes environmental, social, and governance (ESG) investing over traditional financial investment principles.
According to the plaintiffs, the new DOL rule would allow investment decisions based on nonfinancial and nonpecuniary factors, such as ESG, regardless of whether they support the retirement account holders’ best interest. This allegedly would undermine federal law, specifically the Employee Retirement Income Security Act of 1974 (ERISA) and the Administrative Procedure Act, while threatening the financial stability of more than 150 million American retirement accounts.
Why It Matters
This latest legal motion demonstrates certain state AGs’ continued scrutiny of sustainable investing. Most recently on March 1, the Senate voted to block the new DOL rule (50-46), potentially leading to President Biden’s first veto.
