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GOP's anti-ESG play

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Feb 13, 2023
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Illustration: Aïda Amer/Axios

💵 Republicans are about to take the first step in their anti-ESG crusade.

  • The GOP is looking to move a resolution that would toss out a Labor Department rule allowing retirement fund fiduciaries to consider climate and environmental factors in their investments.

Why it matters: The goal here isn't to discard the rule directly, since President Biden would likely veto it. Instead, Republicans believe it can be used in court to establish that Congress never intended the Labor Department to make such a rule.

  • It’s a novel strategy that could extend to the Biden administration’s WOTUS rule and other regulatory issues.

Details: Rep. Andy Barr and Sen. Mike Braun are lead sponsors on a Congressional Review Act resolution of disapproval on the ESG rule.

  • CRA resolutions can pass the Senate with a simple majority.
  • In the House, Barr said he’s hoping leadership will tee up a vote soon.

Sen. Joe Manchin is a cosponsor — but Braun needs one more Democrat to pass it through the Senate.

  • "It's going to be a tough vote for four or five to vote against," Braun said.
  • Sen. Jon Tester told Axios that Braun had approached him, and he didn’t rule out voting for it.

Zoom in: Major investment firms like BlackRock and Vanguard supported the Labor Department rule, and the Biden administration sold it as a financial benefit to investors concerned about climate risk.

Between the lines: "Under the West Virginia v. EPA case, we think [the resolution] gives the litigants strong ammunition to get a court to strike down the regulation," Barr told Axios.

  • That Supreme Court decision on emissions regulation last year helped establish the "major questions doctrine," a conservative legal theory that holds Congress must weigh in on issues of great economic and political consequence.
  • Red states filed a lawsuit in January arguing that the ESG rule does not stand up to major questions.

Yes, but: It’s an unprecedented gambit. Experts we spoke to doubt a CRA resolution with a presidential veto would hold much water in court.

  • "I don't see how a resolution by this Congress speaks to, in any persuasive way, the intent of Congress when they passed this in the first place," said Sidney Shapiro, an administrative law expert at Wake Forest University.
  • Even some Republicans are skeptical: "I don't think the courts are looking for any advice from Congress," Sen. John Cornyn told Axios.

Of note: Barr is someone to watch in this space. Barr told Axios that BlackRock CEO Larry Fink came to his office in January to reassure him the company is "focused on maximizing returns for investors" and that it would "continue to finance fossil energy."

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