© Micheile Henderson
The administration of US president Donald Trump has announced that it plans to overturn a rule that allows pension funds to consider ESG factors when making investment decisions and exercising shareholder voting rights.
The Department of Labor said in May that it will abandon a rule implemented by the administration of former president Joe Biden that allowed pension funds to consider ESG factors and other “collateral benefits”, ESG Dive reported, citing court documents.
A coalition of Republican-led states had challenged the ruling during the previous administration, and Biden issued his first presidential veto to reject a Republican attempt to undo the rule in Congress.
The move comes despite the fact that pressure is mounting on pension funds to take more account of climate change risks, with campaigners calling on trustees to make sustainable investment decisions and use their voting power to push companies they invest in to go green.
Some big pension funds are already taking more action on climate despite Trump’s hostility to ESG, although some companies are backtracking on climate commitments as the Securities and Exchange Commission moves to abandon disclosure requirements.
US and Canadian pension fund returns could fall up to 50% by 2040 if predictions for the worst global warming materialise and if the current approach to climate policy doesn’t change, according to analysis by Ortec Finance, a provider of technology and risk management solutions for financial institutions.
“Climate change is a growing threat to workers’ retirement security. Dismantling safeguards for responsible investing is a dangerous disservice to the millions of Americans saving for the future,” said Ben Cushing, director of the sustainable finance campaign at the Sierra Club.
Cushing called for state and local authorities to step up to increase investor protection.
“As federal officials roll back protections for private retirement plans, state and local leaders must affirm that public pension funds should proactively address climate and sustainability risks,” he said.
As the US federal government rolls back its green policies, some states are taking up the fight against climate change.
Two bills reintroduced in New York’s senate would require climate disclosure rules similar to those adopted by California in 2023, while a bill requiring greenhouse gas emissions disclosures was introduced in Colorado in January.
This page was last updated June 6, 2025
Written by
Emma Thomasson is a British journalist, consultant and trainer based in Berlin. She is an expert in economics, politics, business and technology. She previously worked for Reuters as a correspondent and bureau chief in Germany, Switzerland, the Netherlands, South Africa and the UK.
