Proposal to Roll Back ESG Investing Passes House

H.R. 2988, the Protecting Prudent Investment of Retirement Savings Act has passed in the House of Representatives by a vote of 213-205. Sponsored by Representative Rick Allen (R-GA), the bill seeks to codify that those who manage other people's retirement savings under ERISA must prioritize maximizing returns for a secure retirement rather than political or social impact using environmental, social, and governance (ESG) factors. According to a summary, the bill would do the following. 

• Requires a plan fiduciary to make investment decisions based solely on pecuniary factors (i.e., factors that a fiduciary prudently determines are expected to have a material effect on the risk or return of an investment based on appropriate investment horizons consistent with the plan's policies and objectives).
• Allows nonpecuniary factors to be considered in certain situations, such as when selecting investment options for certain participant-directed retirement plans or if the fiduciary is unable to distinguish between investment alternatives on the basis of pecuniary factors alone.
• Prohibits a plan fiduciary from discriminating when selecting, monitoring, and retaining any fiduciary, counsel, employee, or service provider of the plan.
• Requires a plan fiduciary to act solely and prudently in accordance with the interests of the plan's participants and beneficiaries when exercising a shareholder right (e.g., voting of proxies). However, the fiduciary duty to manage shareholder rights does not require the voting of every proxy or the exercise of every shareholder right.
• Requires a plan fiduciary to provide specified notices regarding the opportunity to select from designated investment alternatives (when a participant chooses from investments through a brokerage window).