Nebraska attorney general joins other states to block rule on ESG investing
By Paul Hammel (Nebraska Examiner),
LINCOLN, Neb. (Nebraska Examiner) — Nebraska has joined 24 other red states in a lawsuit seeking to block a new rule they claim frees up 401K managers to invest in so-called “environmental, social and governance” funds.
The states argue that the U.S. Department of Labor is exceeding its authority by adopting a rule that allows fiduciaries to consider and promote “nonpecuniary benefits” when making investment decisions, according to a press release from the Nebraska Attorney General’s Office.
“Contrary to Congress’s clear intent, these changes make it easier for fiduciaries to act with mixed motives. They also make it harder for beneficiaries to police such conduct,” states the lawsuit, which maintains the rule is a violation of the Employee Retirement Income Security Act of 1974 (ERISA).
ESG investing, or taking into consideration the environmental, social and governance polices of a company, has been criticized by conservative groups and politicians as “woke” and contrary to the goal of investing, which is to maximize returns. Others defend consideration of things such as climate change and diversity policies as important in judging the future success of an investment.
Last month, before he left office, former Nebraska Attorney General Doug Peterson issued a report warning state investment officials about ESG investing as “dangerous” and “a threat to our democratic form of government” because it seeks to impose sustainability goals of the United Nation on U.S. companies.
Two University of Nebraska College of Law professors picked at the Peterson report, calling it “political theater” and being light on the law and a complicated topic but heavy on “international conspiracy.”
New Attorney General Mike Hilgers has picked up on the concerns over ESG and joined the new lawsuit, which is being led by Utah Attorney General Sean Reyes.
It has also drawn the attention of conservative state senators.
Earlier this month, State Sen. Julie Slama of Sterling, who chairs the Legislature’s Banking, Commerce and Insurance Committee, introduced Legislative Bill 67 , which would ensure that funds deposited by the Nebraska state treasurer are “not used by financial institutions for social or political causes or objectives.”
A follow-up discussion with BlackRock, Vanguard and Institutional Shareholder Services is planned at the council’s next meeting Feb. 9.
The 24 states, besides Nebraska, in the lawsuit are: Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, New Hampshire, North Dakota, Ohio, South Carolina, Tennessee, Texas, Utah, Virginia, West Virginia and Wyoming.
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