Trump administration targets ESG. (Yet) again.

The US Department of Labor has taken another swipe at ESG investments by moving to make it more difficult for retirement plan fiduciaries to vote on shareholder proposals that are not explicitly linked to company performance.

With the proposed rule released on Monday, the DoL (led by Eugene Scalia) will require plan administrators to prove they have not prioritised “unrelated objectives” at the plan’s expense or “[allowed] plan assets to be used to support or pursue proxy proposals for environmental, social, or public policy agendas” that are disconnected from financial returns. The proposal follows a similar, controversial move in June that jeopardises the ability of investors to include ESG-themed options in retirement plans.

Both proposed rules serve to limit shareholder involvement on ESG issues, said Steven Rothstein, managing director of the Ceres Accelerator, a centre focused on policies and practices related to climate change. Investors continued to signal that they wanted information about the risks associated with climate change, and to curtail shareholder involvement could have a “stifling” impact, he said. Another critic did not mince words. From the 30-day comment window amid the pandemic to the “giveaway” to corporate insiders, the latest proposal was “appalling,” said Nell Minow, vice-chair of shareholder advisory group ValueEdge Advisors.

Ms Minow questioned the motive behind the proposed rule. “The very people that are always rhapsodizing about free markets and capitalism, they get weak in the knees when it seems like the market is going in another direction.” Both ValueEdge and Ceres sent comments in response to the June proposal. While the latter was reviewing its options this time around, according to Mr Rothstein, Ms Minow was unequivocal.

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