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Illustration: Sarah Grillo/Axios

The case for sustainable investing — or ESG, for environmental, social, and governance — is a pretty simple one: Long-term investors have a clear financial incentive to back companies that will thrive over the long term. Such companies need to be well governed, have good relations with their stakeholders, and be well positioned to help humanity minimize our onrushing environmental catastrophe.

Why it matters: While the Obama administration was well disposed towards such investing, the Trump administration isn't. To sum up the thesis in three letters: ESG, for environmental, social, and governance.

  • A proposed new rule from the Labor Department would effectively ban pension-plan administrators from making any kind of ESG offering part of the default option in a 401(k) plan, and would discourage them from having any ESG options at all.

What they're saying: "When investments are made to further a particular environmental or social cause, returns unsurprisingly suffer," wrote Labor Secretary Eugene Scalia in an 0p-ed announcing the new rule.

  • The rule itself claims that it will have a positive economic effect, saying that "investments' returns will generally tend to be higher over the long run" as a result of ignoring ESG factors.
  • But, but, but: ESG funds outperform their peers.

Between the lines: Scalia doesn't have a lot of support. The asset management industry is naturally wary of this rule, because it creates more work and potential liability for pension fund managers. And even his natural bedfellows are wary.

  • The U.S. Chamber of Commerce initially reacted positively to the rule, but when I asked them for comment, I was put in touch with Chantel Sheaks, the executive director for retirement policy, who praised only the fact that the Department of Labor was implementing a 30-day comment period.
  • The American Petroleum Institute represents the companies most excluded by ESG policies. But the API's Aaron Padilla, who covers ESG policy there, told Axios that he wants the government to "encourage the consideration of ESG as it is linked to companies' financial performance."

My thought bubble: This rule looks like lame-duck hippie-punching from a beleaguered administration wanting to throw a bone to climate-change deniers.

The bottom line: As the Environmental Defense Fund's Gabe Malek told Axios: "ESG is a key part of fiduciary duty in the EU. The U.S. is just lagging behind other countries."

Go deeper

Dems race to address, preempt stimulus fraud claims

Illustration: Aïda Amer/Axios

Biden officials are working to root out the systematic fraud in unemployment and Paycheck Protection Program claims that plagued the Trump administration’s efforts to boost the economy with coronavirus relief money, Gene Sperling told House committee chairmen privately this week.

Why it matters: President Biden just signed another $1.9 trillion of aid into law, with Sperling tapped to oversee its implementation. And the administration is asking Congress to approve another $2.2 trillion for the first phase of an infrastructure package.

1 hour ago - Politics & Policy

Scoop: Biden close to picking Nick Burns as China ambassador

Nicholas Burns. Photo: Alex Wong/Getty Images

Nicholas Burns, a career diplomat, is in the final stages of vetting to serve as President Biden’s ambassador to China, people familiar with the matter tell Axios.

Why it matters: Across the administration, there's a consensus the U.S. relationship with China will be the most critical — and consequential — of Biden's presidency. From trade to Taiwan, the stakes are high. Burns could be among the first batch of diplomatic nominees announced in the coming weeks.

Biden's Russian sanctions likely to achieve little

President Biden announces new sanctions against Russia. Photo: Chip Somodevilla/Getty Images

Despite bold talk from top administration officials, there's little reason to think the Russia sanctions package President Biden announced Thursday will do anything to alter Russian President Vladimir Putin's behavior or calculus.

Why it matters: While it's true some elements of the package — namely, the targeting of Russia's sovereign debt — represent significant punitive measures against Moscow, it leaves plenty of wiggle room for the Russian president.