Manchin digs in against ESG, puts GOP a vote away from rejecting Biden’s woke rules for investments

Sen. Joe Manchin III is escalating his attacks on corporations and financial firms that embrace environmental, social and governance investing as the ESG movement also suffers setbacks in corporate boardrooms.

Once mum on the hot-button issue, the West Virginia Democrat has increasingly targeted the investment strategy that makes fighting climate change a priority. 

Mr. Manchin insisted to The Washington Times in a recent interview that his warning that ESG hurts energy security when geopolitical risks go ignored was “not criticizing ESG” or the responsibility to address climate change. But he has begun to sound more like his Republican colleagues who dub ESG “woke capitalism.”

“Colleges, universities, you have different investment firms — they’re looking only at ESG and not geopolitical risks. They’re not being reasonable [or] practical,” Mr. Manchin said. “If you hang your hat on one thing, without the geopolitical risks — just ask Europe what they’ve gone through.”

Mr. Manchin, who is chairman of the Senate Energy and Natural Resources Committee, has joined a Republican-led effort to tank President Biden’s climate-friendly 401(k) rules that allow retirement fund managers to consider ESG, as first reported by The Times last month, a move that could force Mr. Biden to issue his first veto.

“At a time when our country is already facing economic uncertainty, record inflation and increasing energy costs, it is irresponsible of the Biden administration to jeopardize retirement savings for more than 150 million Americans for purely political purposes,” Mr. Manchin said earlier this month.

His anti-ESG rhetoric comes amid diversity, equity and inclusion workers — components of ESG — being put on the chopping block in recent layoffs across corporate America. Between December 2021 and December 2022, the attrition rate for these DEI workers was 33% compared to 21% for non-DEI workers, according to workforce analytics company Revelio Labs.

Mr. Manchin remains an outlier for Democratic leaders who overwhelmingly back ESG. Republicans in state capitals and on Capitol Hill, meanwhile, are working to combat the woke takeover of pension funds and corporate culture.

When lawmakers return next week from the Presidents Day recess, Mr. Manchin and all 49 Senate Republicans plan to force a vote on a Congressional Review Act resolution to dismantle new Labor Department rules allowing financial managers to use ESG for investing clients’ retirement money.

The vote will only require a simple majority to pass, meaning one more Democrat is needed to pass it. The Republican-controlled House already has the votes.

Potential defectors in the Senate, such as Democrat Jon Tester of Montana and independents Angus King of Maine and Kyrsten Sinema of Arizona, both of whom caucus with Democrats, are holding their cards close to the vest. The trio is up for reelection next year and each is crucial for Senate Democrats to retain the majority.

“If people want to make their own decisions about how they invest, that’s one thing. But if it’s a fund of other people’s money, I think their role is maximizing return, not affecting social policy,” Mr. King told Bloomberg News.

Biden officials insist the criticism from Mr. Manchin and Republicans is misplaced because the new 401(k) regulation, which reverses Trump-era restrictions against ESG, doesn’t mandate how to invest.

“The intent was to level the playing field and make it clear that fiduciaries can look at those factors, but, at the end of the day, they cannot sacrifice risk or return,” Assistant Labor Secretary Lisa Gomez said at a recent American Bar Association webinar. “Those are the basic concepts of prudence and loyalty.”

Senate Majority Leader Charles E. Schumer said Congress should reject the anti-ESG mission.

“Hard-right legislators are up in arms trying to stop investment funds from working with money managers who dare commit the heinous offense of looking at the big picture when making investments, including how climate change and other issues can prevent and present financial risks,” said Mr. Schumer, New York Democrat. “Hard-right MAGA republicans — climate deniers — are trying to straitjacket those companies from ideological exemptions and try to adopt them for their own good and for the good of the country.”