A U.S. judge denied states’ efforts to block Biden’s E.S.G. rule

A rule from the Biden administration, asking retirement funds to consider things like the environment, social issues, and governance in their investments, has won against a legal challenge by 26 states.

Judge Matthew J. Kacsmaryk in Texas decided not to block this rule, which is part of an ESG focusing on how companies deal with labour, social justice, and the environment when investing.

The judge’s decision found problems with the lawsuit filed by Republican-led states in January. They claimed the rule broke federal laws governing retirement plans, arguing that Congress hadn’t clearly said whether factors like E.S.G. should guide investment choice.

Judge Kacsmaryk wrote “While the court is not unsympathetic to plaintiffs’ concerns over E.S.G. investing trends, it need not condone E.S.G. investing generally or ultimately agree with the rule to reach this conclusion,”

E.S.G. investing, driven by concerns over climate change and social justice, has gained popularity. Investment funds now require companies to meet E.S.G. criteria to be included in their portfolios, prompting corporations to address ethical and financial aspects.

The battle over whether retirement investors can consider environmental and social factors has been ongoing. In 2020, the Trump administration sought regulations discouraging such considerations. In 2021, the Biden administration proposed rule changes favouring social factors in retirement plans.

These changes began on Jan. 30. In March, Congress blocked them, with bipartisan support. President Biden vetoed this move.

In May, Texas and Utah led a group of states in requesting a summary judgement in their favour from Judge Kacsmaryk. On Thursday, the judge granted the Labor Department’s motion for summary judgement.