"US Supreme Court ruling on agency powers may impact Biden ESG investing rule", 22 Jan 2024

An impending U.S. Supreme Court ruling that could curb the regulatory powers of federal agencies may play a critical role in a challenge by Republican-led states to a rule issued by President Joe Biden's administration allowing socially conscious investing by employee retirement plans, according to a new court filing.

The 26 states, led by Utah and Texas, asked a U.S. appeals court... to wait to decide whether to block the U.S. Department of Labor rule until the Supreme Court issues its decision on agency powers, expected by the end of June...

Two fishing companies asked the justices to restrict or overturn the Supreme Court's 1984 legal precedent requiring judges to defer to reasonable federal agency interpretations of U.S. laws deemed to be ambiguous, a doctrine called "Chevron deference."

..U.S. District Judge Matthew Kacsmaryk,... said in September that the U.S. law governing retirement plans was unclear on whether such plans could consider environmental, social and corporate governance (ESG) factors in making investment decisions.

The Labor Department's view that plans can weigh those factors as long as they prioritize traditional financial considerations was reasonable, Kacsmaryk said in declining to block the rule pending the outcome of the lawsuit.

The states... filed a brief with a New Orleans-based 5th U.S. Circuit Court of Appeals seeking to reverse Kacsmaryk's decision. They said Chevron deference does not apply to the case because federal law clearly requires retirement plans to act "solely and exclusively" for the financial benefit of participants.

But if the 5th Circuit finds otherwise, it should wait for the Supreme Court to rule on the fate of Chevron deference before deciding the case, the states said in their filing.

The rule improperly inserts political agendas into investment decisions that affect the retirement savings of hundreds of millions of people, the states said. A subsidiary of Liberty Energy and an oil and gas trade group are also plaintiffs in the case....

The brief by the states represents an early illustration of the widespread impact that overruling Chevron deference could have by making it harder for federal agencies to defend their rules in court.

Pushing to eliminate the doctrine is part of a broader effort by conservatives and business-backed groups to curb the powers of what they call the "administrative state" as they seek to weaken the federal agency bureaucracy that interprets laws, crafts rules and implements executive action...

Biden's administration has urged the Supreme Court to preserve Chevron deference, arguing that the doctrine recognizes the need for agencies to "fill in the gaps" when legislation is ambiguous...