Here’s the short version: the Department of Labor’s decision to reopen the Biden-era ESG rule is overdue—and welcome.
Yes, Judge Kacsmaryk blessed the 2022 regulation under the new post-Loper Bright world, but legal survivability is hardly the same thing as sound policy. The rule’s core flaw is philosophical, not procedural: it invites fiduciaries to sprinkle non-pecuniary dust onto investment decisions that should be grounded, full stop, in dollars and risk-adjusted return. ESG may be fashionable cocktail-party talk, but retirement plans are neither hedge funds for social experiments nor slush funds for political goals. They exist to replace paychecks, not to save the planet or re-engineer boardrooms.
That’s why the attorneys general filed suit in January 2023. It wasn’t grandstanding; it was recognition that the rule muddies the clean line ERISA has always drawn: undivided loyalty to pecuniary benefit. Every time regulators imply “Sure, go ahead and weigh climate metrics if you feel they matter,” they push fiduciaries toward situations where proving pure pecuniary intent becomes a discovery nightmare. Litigation risk skyrockets, participant trust erodes, and plan committees start behaving like nervous cats—terrified of stepping on the wrong political land mine.
The ESG crowd insists “material factors” like climate risk are simply another lens for measuring value. Maybe. But a fiduciary already has license—indeed, a duty—to consider any factor demonstrably linked to return. We don’t need an acronym to do that. What the 2022 rule really did was give cover for mission-driven screens and shareholder campaigns that, more often than not, have indeterminate or negative value in a diversified portfolio. Ask ten asset managers for an ESG score, get twelve different answers and a higher fee schedule. Participants get the bill.
So, credit where it’s due: the Trump DOL’s decision to initiate notice-and-comment and potentially restore the 2020 rule signals a return to clarity. Tell fiduciaries: price the risk, prove the math, and leave the politics to Congress. If a climate metric, a diversity statistic, or a governance ratio truly moves the valuation needle, bake it into your cash-flow model like you would any other risk driver—no ESG halo required.
Will the new proposal fix every ambiguity? Probably not. But at least we can start from a place where fiduciary duty isn’t stretched to accommodate every social crusade with a PowerPoint deck and a marketing budget.
