The U.S. House of Representatives on Thursday (January 15) passed the “Protecting Prudent Investment of Retirement Savings Act” promoted by Republicans. The bill aims to change the standards for retirement plan trustees to prioritize financial returns over factors such as “environmental, social, and governance” (ESG) in investment decisions.
This bill, which received 213 votes in favor and 205 votes against, was introduced by Republican Representative Rick Allen from Georgia and received support from the Chairman of the House Committee on Education and Labor, Republican Representative Tim Walberg from Michigan.
The bill amends the 1974 Employee Retirement Income Security Act (ERISA), reinstating and strengthening the standard for plan fiduciaries covered by ERISA, including 401(k) and pension plans, to consider only pecuniary factors in investment decisions.
The legislation requires fund fiduciaries to base their investment or asset management decisions solely on economic factors such as risk, return, liquidity, and diversification, explicitly limiting the consideration of other non-monetary factors, including ESG-related criteria.
It is evident that this bill overturns the rule designated by the Department of Labor during the Biden administration in 2022. That rule encouraged fund managers to consider ESG factors more in their investments.
ESG is a popular concept in the investment field for so-called “progressives,” standing for Environmental, Social, and Governance. The Environmental aspect focuses on a company’s impact on climate change, carbon emissions, and resource usage. The Social aspect pertains to how companies address issues related to DEI (diversity, equity, and inclusion) concerning employees, communities, supply chain human rights, and gender and sexual orientation diversity. Governance relates to corporate management structure, anti-corruption measures, and board independence.
Some investors use ESG criteria to screen investments, prioritizing environmentally-friendly companies and avoiding those with high pollution levels or potential social controversies. They believe that companies performing well on ESG elements are more sustainable and carry lower risks in the long run. However, critics argue that this practice brings political or social agendas into investment decisions, potentially sacrificing financial returns.
The Department of Labor under the Trump administration had revoked a similar rule and announced plans to replace the regulations from the Biden era. The new rule reinstates the position held during Trump’s first term, emphasizing that fund fiduciaries should focus on maximizing investment returns.
Following the vote, Walberg stated, “The ESG rule designated by the Biden-Harris administration abandons longstanding, traditional fiduciary protections, allowing politics to influence retirement investment decisions. This is a serious mistake that puts retirees’ savings at risk.” He added, “H.R. 2988 clarifies that fiduciaries must prioritize financial returns, restoring transparency and accountability.”
The new legislation also addresses issues concerning proxy voting and shareholder rights, emphasizing that proxy voting by retirement plans must be based on the economic interests of plan participants and beneficiaries. Fiduciaries must adhere strictly to ERISA’s prudence and loyalty duties when exercising shareholder rights, including proxy voting.
While the law does not prohibit investments based on plan participants’ or beneficiaries’ religious preferences, it sets non-discrimination clauses for service provider selection, prohibiting considerations based on race, color, religion, gender, or nationality.
Additionally, for Defined Contribution Plans that offer a Brokerage Window, the bill requires clearer notifications to participants, distinguishing between investments selected by ERISA fiduciaries and those chosen through brokerage windows, where fiduciary protection may be more limited.
The bill passed the House Committee on Education and Labor with partisan voting and subsequently passed in the entire House, primarily with Republican support. Opponents include unions, investor advocates, and public interest groups who argue that the bill may restrict fiduciaries from considering genuine financial risks related to climate change, labor practices, or corporate governance.
However, supporters emphasize that ERISA aims to protect workers’ financial interests rather than promote social or political agendas.
Walberg stated during the debate, “The core of this legislation is a simple principle: the management of retirement savings should aim to protect workers’ futures—not to advance political agendas.”
The bill’s prospects in the Senate remain uncertain. In October 2025, on the eve of a government shutdown, Republican Senator Bill Cassidy from Louisiana introduced complementary legislation against ESG and submitted it to the Senate Committee on Health, Education, Labor, and Pensions, but the Senate has yet to vote on it.
In recent years, measures similar to those just passed by the House have faced repeated hurdles in the Senate. However, with the current slim Republican majority, there is hope for the new bill to pass in the Senate.