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A coalition of Republican-led states has asked a federal judge to block a Biden administration rule allowing retirement plans to consider environmental, social, and corporate governance (ESG) factors in selecting investments pending the outcome of their legal challenge.
The 25 states in a motion filed in Amarillo, Texas federal court on Tuesday said the rule, which took effect Jan. 30, could lead to millions of Americans losing retirement investments and harm states’ finances.
The lawsuit claims the rule violates the federal law regulating employee benefit plans by allowing them to focus on social issues rather than long-term financial stability.
A subsidiary of oil drilling company Liberty Energy Inc and an oil and gas trade group are also plaintiffs in the case.
The U.S. Department of Justice did not immediately respond to a request for comment.
The Biden administration has moved to transfer the lawsuit to a different court, accusing the states of engaging in judge shopping.
The only judge in the Amarillo court is U.S. District Judge Matthew Kacsmaryk, whose courthouse has become a favored destination for Republicans seeking to challenge aspects of Democratic President Joe Biden’s agenda.
An appointee of Republican former President Donald Trump, Kacsmaryk has previously struck down Biden administration rules on immigration and healthcare protections for LGBTQ people.
The states have not responded to the administration’s motion.
The ESG rule makes it easier for retirement plans to invest in socially-responsible funds and companies, though it also requires traditional financial considerations. The rule covers plans that collectively invest $12 trillion on behalf of more than 150 million people.
The states challenging the rule, led by Utah and Texas, said in Tuesday’s filing that it would lead to lower tax revenue and hamper economic activity by decreasing investments in the fossil fuel industry.
“A rule of such vast economic and political significance requires clear authorization from Congress, which does not exist here,” they said.
Copyright 2023 Thomson/Reuters