Legal Challenge Spurs Policy Reversal
The Trump Administration announced plans to revoke a Biden-era rule that encouraged the use of Environmental, Social, and Governance (ESG) factors in retirement investing. This decision follows a lawsuit filed by the Wisconsin Institute for Law & Liberty (WILL) on behalf of two Wisconsin investors, arguing that the rule violated federal law by promoting political and social objectives over financial performance.
In early April, President Trump signed an executive order targeting ESG policies and demanded his Attorney General Pam Bondi take action to stop its enforcement.
What Is ESG—and Why It’s Controversial
ESG investing prioritizes factors such as climate change initiatives and Diversity, Equity, and Inclusion (DEI) policies over traditional financial returns. Critics argue this approach undermines fiduciary duties established under the Employee Retirement Income Security Act (ERISA), which requires plan administrators to prioritize maximizing financial returns for retirees.
WILL Responds to Legal Victory
Dan Lennington, Deputy Counsel at WILL, stated, “For years, the Biden Administration jeopardized the retirement incomes of over 140 million Americans by pushing phony investment strategies promoting climate change and DEI. WILL was the first to sue, and now we are seeing the fruits of our lawsuit.”
Fulfilling a Campaign Promise
Fulfilling a campaign promise to eliminate DEI mandates and what he calls “radical climate change policies” like the “Green New Scam,” President Trump’s Administration filed a consent motion to pause litigation in Braun, Luehrs v. Walsh. The Department of Labor has formally announced it is reconsidering, and likely rescinding, the rule—potentially ending ESG’s inclusion in federally regulated retirement planning.
Backlash Against ESG Investing Intensifies
This move comes amid growing backlash to ESG. According to Morningstar, U.S. investors have withdrawn funds from ESG portfolios for 10 consecutive quarters, with $6.1 billion pulled in Q1 2025 alone. The outflows reflect both rising interest rates and Trump’s sweeping anti-ESG agenda, including U.S. withdrawal from the Paris Agreement and rollback of electric vehicle subsidies.
ESG Demand Remains Among Key Groups
Yet analysts caution this is not the end of ESG. Many younger investors and pro-ESG states like California continue to support sustainable investing. Advocates argue that ESG strategies deliver stronger long-term value by positioning companies for resilience and risk mitigation.
A Return to Profit-First Retirement Planning
This policy shift marks a broader return to prioritizing traditional economic strategies over political or ideological investing, reinforcing Trump’s goal to dismantle Biden-era regulatory frameworks tied to climate and DEI agendas