(Bloomberg) -- Joe Biden issued the first veto of his presidency, rejecting legislation that would thwart a rule allowing retirement portfolio managers to weigh climate change and other environmental, social and governance issues in their investment decisions.
“The Department of Labor’s final rule protects the hard-earned life savings and pensions of tens of millions of workers and retirees across the country” Biden said in a statement on Monday.
The Labor Department rule was created to undo a Donald Trump-era requirement mandating that workplace retirement-plans focus purely on financial gains. While consideration of climate change in selecting retirement investments was still possible under former president Trump’s measure, the Biden rule made it explicitly allowed.
So-called ESG factors — short-hand for environment, social and governance — have grown in popularity in the finance sphere.
“There is extensive evidence showing that environmental, social, and governance factors can have a material impact on markets, industries, and businesses. But the Republican-led resolution would force retirement managers to ignore these relevant risk factors, disregarding the principles of free markets and jeopardizing the life savings of working families and retirees,” Biden added.
“Retirement plan fiduciaries should be able to consider any factor that maximizes financial returns for retirees across the country. That is not controversial — that is common sense,” he said.
With Democrats in control of both the House and Senate during his first two years in office, Biden has been spared having to exercise his veto power until now. The move portends more confrontations to come with Republicans, who took control of the House in January.
The measure blocking the rule passed 50-46 in the Senate earlier this month, with two Democrats — Joe Manchin of West Virginia and Jon Tester of Montana — joining with Republicans. Three Democratic senators were absent for the vote, contributing to a rare loss for Democrats, who have the ability to stave off Republican-led bills with a 51-49 majority in the chamber.
The Republican-led House had voted 216-204 to clear its version, and the vote tally in both chambers indicates that Congress lacks the two-thirds majority needed to override a Biden veto.
Still, passage marked a victory for Republicans’ crusade against “woke” capitalism: They’re attacking ESG as an attempt to push climate-change politics into Americans’ financial planning.
“The president’s got it 180 degrees backwards on this. People’s investment is more at risk,” Rep. Bill Huizenga said on Bloomberg Radio’s “Sound On.”
Republicans have only ramped up their attacks on ESG investing following the collapse of Silicon Valley Bank this month, saying politically driven investment decisions were partly responsible for the banking crisis.
“They were one of the most woke banks in their quest for the ESG-type policy and investing,” Representative James Comer, chairman of the House Oversight Committee, told Fox News.
Read: The Retirement Fund Rule on ESG Biden Vows to Save: QuickTake
Florida Governor Ron DeSantis and Virgina Governor Glenn Youngkin — two potential 2024 GOP presidential aspirants — are among the chief critics of ESG-based investing.
Biden announced his veto in a tweet, hitting at Republicans for backing the anti-ESG legislation.
“This bill would risk your retirement savings by making it illegal to consider risk factors MAGA House Republicans don’t like,” Biden said in the tweet. “Your plan manager should be able to protect your hard-earned savings — whether Representative Marjorie Taylor Greene likes it or not,” he added, referring to the Republican lawmaker from Georgia.
I just vetoed my first bill.— President Biden (@POTUS) March 20, 2023
This bill would risk your retirement savings by making it illegal to consider risk factors MAGA House Republicans don't like.
Your plan manager should be able to protect your hard-earned savings — whether Rep. Marjorie Taylor Greene likes it or not. pic.twitter.com/PxuoJBdEee
“The President vetoed the bill because it jeopardizes the hard-earned life savings of cops, firefighters, teachers, and other workers – all in service of an extreme, MAGA Republican ideology,” said White House spokesperson Robyn Patterson.
Former Presidents George W. Bush and Barack Obama each used their veto pen a dozen times during their two-term tenures, while Trump vetoed 10 Congressional bills, according to government data.
--With assistance from Laura Litvan, Diego Areas Munhoz, Gregory Korte, Jennifer Jacobs and Justin Sink.