Biden Administration Trying to Force ESG Rules on Fiduciaries

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Greenwash Biden Administration Trying to Force ESG Rules on Fiduciaries

Copyright: 2008 mike langridge www.fotdmike.me.uk. Licensed under Creative Commons CC BY-NC-ND 2.0 UK

No worries!  The Biden administration is looking out for your 401(k), IRA, and other retirement vehicles. NOT! The Biden administration is trying to force ESG rules on fiduciaries. From SHRM.org:

The U.S. Senate on March 1 voted to overturn the month-old regulation that allows fiduciaries to consider environmental, social and corporate governance (ESG) factors when choosing retirement investments.

The resolution will head to President Joe Biden, who earlier this week promised he would veto any bill that nullifies the ESG rule.

All Senate Republicans present and two Democrats on Wednesday voted for the resolution to void the Department of Labor’s (DOL’s) ESG rule in a 50-46 vote. On Feb. 28 in a 216-204 vote, members of the U.S. House of Representatives approved an identical resolution.

ESG stands for Environmental, Social, and Governance. The idea is that fiduciaries — those entities responsible for ensuring that your retirement accounts are managed to benefit you — should take into account non-economic factors when allocating your portfolio.

This will not work.  If markets are anywhere near efficient, portfolios that maximize returns (subject to a risk constraint) must, by definition, outperform those that do anything other than maximizing returns.  That includes ESG.  If you’d like more details, I strongly recommend the SHRM.org article linked above.

Forthwith, Dilan Esper’s take on this issue:

 

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About Tony Lima

Retired after teaching economics at California State Univ., East Bay (Hayward, CA). Ph.D., economics, Stanford. Also taught MBA finance at the California University of Management and Technology. Occasionally take on a consulting project if it's interesting. Other interests include wine and technology.