Joe Biden’s first veto takes on Republicans’ war on “woke capitalism”

joe-biden’s-first-veto-takes-on-republicans’-war-on-“woke-capitalism”
A photo of President Joe Biden wearing sunglasses, against a blue sky.
President Joe Biden attends a press conference after a meeting with the Australian and British prime ministers on March 13, 2023 in San Diego, California. | Leon Neal/Getty Images

Biden has officially blocked an anti-ESG resolution pushed by the GOP.

President Joe Biden has officially issued his first veto, blocking a Republican effort to stop retirement fund managers from considering environmental and social concerns — or ESG — in their investments.

“There is extensive evidence showing that environmental, social, and governance factors can have a material impact on markets, industries, and businesses,” Biden wrote in a message to the House accompanying his decision.

The veto was inevitable, but changing the rule was never Republicans’ main goal. Instead, they sought to frame this specific approach to investing — and the administration’s support of it — as “woke,” in an attempt to make it the centerpiece of their latest culture war.

As Vox’s Rebecca Leber explains, considering ESG factors involves evaluating how a company might approach subjects like climate change or employees’ working conditions as part of the decision to invest in it, but it doesn’t necessarily include altruistic aims. According to financial experts, a big reason to weigh environmental and social concerns is because of the risk they could pose to a company’s returns.

The resolution, ultimately, is a prime example of a spate of recent Republican efforts to force Democrats into taking stances on issues the GOP aims to use against them in future campaign attacks. In addition to the anti-ESG measure, Republicans have pushed resolutions about crime and Covid-19, both of which are intended to underscore splits among Democrats and make vulnerable lawmakers take tough votes.

“What we’ve seen over time is [these resolutions have] become attractive as a way to force messaging votes, even if there’s no expectation that it’s going to work,” says Brookings Institution governance studies fellow Molly Reynolds.

ESG is among the issues Republicans are trying to harp on for messaging

Biden’s veto effectively allows money managers overseeing retirement funds to continue using environmental, social, and corporate governance principles as they evaluate investments, though it does not require that they do so.

Using ESG principles enables financial managers to factor in things like a company’s environmental practices while making investment decisions. It can also include consideration of other “social” and “corporate governance” practices, such as how a firm treats its workers or whether its board has diverse representation.

This approach, while framed as a more socially conscious way to invest, centers on examining how these issues could impact a company’s bottom line, financial experts say. For instance, if rising sea levels due to climate change could affect a company’s products, that could be viewed as a riskier investment by a financial manager using ESG principles, a Harvard Business Review article explains.

Republicans, however, argue that considering ESG factors amounts to what they describe as “woke capitalism” intended to promote liberal ideas and to divest from entities like fossil fuel companies. Those attacks aren’t limited to the Hill: Florida Gov. Ron DeSantis, for example, has railed against ESG and argued that using these principles is a way for investors to advance liberal policies. Going after the Labor Department’s ESG rule is lawmakers’ latest effort to hammer this idea.

The veto pushes back on a prior Trump administration rule that made it tougher for money managers to take ESG factors into consideration. And it could be the first of several batting down the proposals Republicans are pushing. House Republicans have also approved a resolution that would roll back a new water policy established by the Environmental Protection Agency, for example. Interestingly, Biden is on track to sign at least one of these resolutions, after expressing support for a Republican measure overturning DC’s updates to its criminal code.

Republicans are using this resolution — and others — for their own political aims

Most of House Republicans’ bills, such as attempts to gut IRS funding, are poised to be stuck in the lower chamber, given Democrats’ narrow control of the Senate. But resolutions like this one present an opportunity for them to send a larger message.

These resolutions are among the measures that can be considered in the Senate in an expedited fashion. In practice, that means Senate Republicans can force these measures out of committee without any Democratic support and pressure lawmakers to take floor votes on them. Because these resolutions also only need a simple majority to pass in both chambers, the GOP can effectively get them approved if they peel off a few Democrats.

By focusing these resolutions on issues that could be controversial for moderate voters, Republicans are forcing House and Senate Democrats who are up for reelection in 2024 to go on the record about them. Additionally, they’re underscoring existing Democratic divides on subjects such as policing and crime.

Below is a list of the issues that Republicans have targeted in this way — and where they stand:

  • ESG rule: Both the House and the Senate have passed a resolution rolling back the Labor Department rule that allows investors overseeing retirement funds to consider ESG factors. One House Democrat — Rep. Jared Golden (D-ME) — and two Senate Democrats — Sens. Jon Tester (D-MT) and Joe Manchin (D-WV), both of whom represent battleground states — joined Republicans in supporting the resolution, which Biden is now expected to veto.
  • Crime: The House and Senate have approved a resolution overturning a law the Washington, DC, city council has passed, which would update its criminal code. Republicans have suggested that the updates are too “soft on crime.” Thirty-one House Democrats and 33 members of the Senate Democratic Caucus, including multiple members up for reelection in 2024, joined Republicans in supporting the resolution. The measure highlighted a Democratic fracture over sentencing changes the DC law would have made, as well as the role of Congress in meddling with the city’s policies. It now heads to Biden’s desk, where he’s expected to sign it.
  • Noncitizen voting: The House approved a resolution that tried to undo a new DC law enabling noncitizens to vote in local elections, with Republicans arguing that it would allow people working for foreign governments to have a say in US elections. Forty-two House Democrats voted with Republicans on the measure. The resolution was sent to the Senate, but it did not receive a floor vote before the window to pass it expired.
  • Water: The House has approved a resolution that tries to roll back a rule from the EPA, which allows the implementation of Clean Water Act regulations on private property. The rule effectively redefines what wetlands are, so that policies protecting them can be more broadly applied. Nine House Democrats joined with Republicans to pass this bill, which is now under consideration in the Senate, where it has the backing of Manchin and potentially other Democrats as well. The White House has said it intends to veto this resolution if it passes both chambers.

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