U.S. Supreme Court ruling on agency powers could impact Biden ESG investment rules By Reuters

© Reuters. FILE PHOTO: The rising sun casts a shadow over the U.S. Supreme Court in Washington, D.C., Dec. 20, 2023. REUTERS/Kevin Lamarque/File Photo

Daniel Wisner

(Reuters) – An impending U.S. Supreme Court decision that could curb federal agencies’ regulatory authority prompts challenges in Republican-led states to President Joe Biden’s administration’s rules allowing socially conscious investments through employee retirement plans. can play an important role in doing so. According to new court documents.

Twenty-six states, led by Utah and Texas, asked the U.S. Court of Appeals late Thursday to wait to decide whether to block the U.S. Department of Labor rule until the Supreme Court issues a decision on the agency’s authority, expected by the end of June.

The Supreme Court on Wednesday heard arguments in a dispute involving a government-run program to monitor overfishing of herring off the New England coast. The two fishing companies asked the justices to limit or overturn a 1984 Supreme Court precedent that required judges to defer to reasonable federal agencies’ interpretations of U.S. laws deemed ambiguous. chevron (NYSE:) Respect.”

U.S. District Judge Matthew Kacsmaryk in Texas, who presided over a lawsuit challenging the investment rules, said in September that U.S. laws governing retirement plans require such plans to consider environmental, social and corporate governance when making investment decisions. He said it was unclear whether (ESG) factors could be taken into account. .

The Labor Department’s view that these factors can be evaluated as long as plans prioritize traditional financial considerations is reasonable, Kacsmaryk said, declining to block the rule pending the outcome of the lawsuit.

The state filed a brief Thursday with the New Orleans-based U.S. Court of Appeals for the 5th Circuit seeking to overturn Kacsmaryk’s decision. They said Chevron’s deference did not apply in this case because federal law requires retirement plans to act “solely and exclusively” in the financial interests of their participants.

But if the 5th Circuit decides otherwise, it would have to wait until the Supreme Court rules on the fate of the Chevron decision before deciding the case, the state said in its filing.

The rule inappropriately inserts a political agenda into investment decisions affecting the retirement savings of hundreds of millions of people, the state said. A subsidiary of Liberty Energy and an oil and gas trade group are also plaintiffs in the case.

The rules, finalized in November 2023, cover plans to invest a total of $12 trillion on behalf of more than 150 million people. This is a reversal of restrictions adopted by former Republican President Donald Trump’s administration to consider ESG factors in investment decisions.

Critics of ESG investing, including many Republicans, say it advances liberal political and social agendas at the expense of plan participants or shareholders who may suffer financial losses as a result.

The U.S. Justice Department, which is defending the ESG rules, did not immediately respond to a request for comment.

The state’s brief represents an early example of the far-reaching impact that deference to Chevron could have by making it more difficult for federal agencies to defend their rules in court.

The push to eliminate the doctrine is an attempt by conservatives and pro-business groups to weaken the bureaucracy of federal agencies that interpret laws, make rules and carry out executive actions, and to curb the power of what they call the “administrative state.” It’s part of a broader effort. .

The Supreme Court handed the movement a significant victory in 2022, ruling that Congress, not federal agencies, has the power to adopt policies related to “critical issues” with broad societal implications.

The Biden administration urged the Supreme Court to uphold Chevron’s deference, arguing that the agency recognizes the need to “fill in the gaps” when legislation is ambiguous.

Questions posed by the justices during arguments Wednesday did not show a clear majority in favor of overturning Chevron’s decision. Some of the conservative justices, who make up a 6-3 majority on the court, appeared skeptical about the doctrine’s continued effectiveness, while others expressed hesitation about overturning it.

(This story has been rewritten to correct a distortion in paragraph 1.)