A coalition of Republican-led states has asked a federal judge to block a rule by the Biden administration that would have allowed pension plans to consider environmental, social and corporate governance (ESG) factors when choosing investments, pending approval.
In a petition filed Tuesday in federal court in Amarillo, Texas, 25 states say the rule, which took effect Jan. 30, could cost millions of Americans their retirement investments and hurt states’ finances.
The lawsuit alleges that the rule violates federal law regulating employee benefit plans by allowing them to focus on social issues rather than long-term financial sustainability.
A subsidiary of oil driller Liberty Energy Inc. and an oil and gas trade group are plaintiffs in the suit.
The US Department of Justice did not immediately respond to a request for comment.
The Biden administration has asked the case to be transferred to a different court and has accused the states of judge shopping.
Amarillo’s court’s sole judge is U.S. District Judge Matthew Kasmaric, whose courthouse has become a favorite destination for Republicans seeking to challenge aspects of Democratic President Joe Biden’s agenda.
Kacsmarik, who was appointed by former Republican President Donald Trump, has previously rejected the Biden administration’s rules on immigration and health care for LGBTQ people.
The states did not respond to the government’s resolution.
The ESG rule makes it easier for pension plans to invest in socially responsible funds and companies, but it also requires traditional financial considerations. The rule applies to projects that invest $12 trillion on behalf of more than 150 million people.
States challenging the rule, led by Utah and Texas, said in filings Tuesday that the rule would reduce tax revenue and disrupt economic activity by reducing investment in the fossil fuel industry.
“A regime of such great economic and political significance requires the express approval of Congress, which is absent here,” they said.