TOPEKA – (January 26, 2023) – Kansas Attorney General Kris Kobach today joined a 25-state coalition in a lawsuit over a U.S. Department of Labor rule which would affect the retirement accounts of millions of people.
The rule would allow 401(k) managers to direct their clients’ money to ESG (Environmental Social Governance) investments and runs contrary to the laws outlined in the Employee Retirement Income Security Act of 1974 (ERISA).
“The proponents of ESG want to use corporations, investment strategies and ESG scoring to phase out fossil fuels, increase our dependence on foreign countries, weaken agriculture, starve the firearms industry of capital, and reshape membership on corporate boards,” Kobach said. “To some, those are lofty political goals, but they should advocate those goals in the legislatures of this country, not quietly sacrifice Kansas pensioners’ dollars to advance their partisan agenda.”
The new rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” will take effect on January 30, 2023. Two-thirds of the U.S. population’s retirement savings accounts would be affected, totaling $12 trillion in assets. Strict laws placed in ERISA are intended to protect retirement savings from unnecessary risk.
According to the complaint: “[T]he 2022 Investment Duties Rule makes changes that authorize fiduciaries to consider and promote “nonpecuniary benefits” when making investment decisions. … 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.”
On Thursday, Kobach outlined a legislative proposal which would prohibit the application of ESG standards in the investment of Kansas pensioners’ dollars. Versions of the bill are pending in the House and Senate and would enact some of the most stringent ESG restrictions in the country. In addition to ensuring that Kansas Employee Retirement System dollars are invested only to maximize financial return, the bill also has a section that protects private investors. It requires registered investment advisers to obtain written consent from their clients prior to investing in ESG-driven funds.
The 24 states joining Kansas in the federal lawsuit are: Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, Ohio, South Carolina, South Dakota, Tennessee, Texas, Virginia, West Virginia, and Wyoming.
A copy of the complaint is available at https://bit.ly/3kQcnSA.