Analysis by Energy Workforce President Tim Tarpley
In a vote that could be a precursor of things to come on the ESG front, last week the Senate voted to overturn a Labor Department rule that permits fiduciary retirement fund managers to consider climate change, good corporate governance and other factors when making investments on behalf of pension plan participants.
The final vote in the Senate was 50-46, with Sen. Joe Manchin of West Virginia and Sen. Jon Tester of Montana crossing party lines and voting with Republicans to support the legislation to overturn the rule. The measure passed the day before in the House largely along party lines.
Both Tester and Manchin expressed economic reasons to support their opposition, with Manchin going as far as saying ESG “could kill the entire economy.” Sen. Manchin’s voice is incredibly important on this issue as he leads the Senate Energy committee but also because he is a key swing vote in the chamber.
Now, the measure will head to the President’s desk where he is expected to veto it. Unless there is significant movement in votes, which is unlikely, there will not be the two-thirds vote necessary for a veto override.
This action is important to us not only as it will be determinative to the final status of the Labor rule, but also because it gives us a good idea of how future ESG rule action in the House and Senate could play out. We are still waiting for the larger ESG SEC rule to be released. It has long been delayed but we are hearing it could come as soon as April. Like the Labor rule, we would expect that an effort to disapprove of the rule will also be filed by House Republicans and ultimately voted on. Likely Tester and Manchin will continue to vote with the Republicans on this issue when presented in the Senate. Both are from pro-energy Republican states and are up for election in the next cycle.
Whether or not their opposition is enough to ultimately put political pressure on the Administration to pull back or scrap the rule entirely remains to be seen, but the fact that it continues to be delayed shows that the politics of ESG have changed. The defections show that there are cracks in the Democrats when it comes to ESG, and it also shows there is a realization this is not necessarily a good issue for them.
We can expect Republicans to keep pushing on this issue because they feel that they have a winner. More federal disapproval resolutions on ESG-related issues are likely, as are additional state level measures.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.