Bloomberg Law
Jan. 26, 2023, 11:37 PM

Red States Sue to Block Labor Department’s ‘Woke’ ESG Rule

Janet Miranda
Janet Miranda

Texas, leading a coalition of 24 states, sued the Biden Administration Thursday to stop a new US Department of Labor rule that allegedly prioritizes “ill-defined” environmental, social, and governance concepts into ERISA regulations.

The rule “prioritizes woke Environmental, Social and Governance investing over protecting the retirement savings of approximately two-thirds of the US population,” Texas Attorney General Ken Paxton (R) said in a press statement announcing the filing at the US District Court for the Northern District of Texas.

The rule authorizes retirement plans to consider nonfinancial factors when administering trust assets, which violates the federal tax and labor law, the complaint said.

The Department of Labor “expressly stated that the intended effect of the 2022 rule was to loosen restrictions on fiduciaries to consider ESG factors in their decision making,” Paxton said in the filing. This could potentially allow investment managers to substitute their own ESG policy preferences instead of prioritizing long-term financial stability for their clients, he said.

Texas and the other states contend that the rule conflicts with ERISA because current law requires fiduciaries to consider financial benefits first and not any “nonfinancial and nonpecuniary benefits.” The complaint also accuses the DOL of departing from prior policy, because its 2020 rule still required that financial factors take precedence.

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ERISA covers approximately 747,000 retirement plans, 2.5 million health plans, and 673,000 other welfare benefit plans. Employee benefit plans cover about 152 million workers, and more than $12 trillion in plan assets, equivalent to more than half of the nation’s gross domestic product, the complaint said.

“The sheer magnitude of the assets that the 2022 Investment Duties Rule would affect—over half of the GDP of the entire United States—suggests that courts should hesitate before finding that DOL has authority to regulate in this area for nonfinancial purposes,” Paxton said.

States that joined in the challenge include Virginia, Louisiana, Alaska, Arkansas, Florida, Georgia, Indiana, South Carolina, Tennessee, West Virginia, Wyoming. One energy company, Liberty Energy Inc., and trade association, Western Energy Alliance, also joined.

Most of the rule challenged becomes effective on Jan. 30, 2023.

Causes of Action: Administrative Procedure Act

Relief: Declaratory and permanent injunctive relief declaring defendants’ actions unlawful and enjoining defendants from enforcing the rule.

Response: DOL didn’t immediately respond to a request for comment.

Attorneys: Each plaintiff state is represented by its attorney general.

The case is Utah v. Walsh, N.D. Tex., No. 2:23-cv-00016, Complaint filed 1/26/23.

To contact the reporter on this story: Janet Miranda in Houston at

To contact the editors responsible for this story: Rob Tricchinelli at; Andrew Harris at