Extinguishing ESG: US House Approves Prohibitive Bill for Pension Funds

20 January 2026

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By Jack Grogan-Fenn

A bill which would prohibit ESG factors being considered by pension fund managers and in pension plans has been narrowly approved by the US House of Representatives.

The Protecting Prudent Investment of Retirement Savings Act – also referred to as HR 2988 – seeks to amend the 1974 Employee Retirement Income Security Act (ERISA) to specify requirements regarding the consideration of pecuniary and non-pecuniary factors. It proposes to add limitations on consideration of non-pecuniary factors by fiduciaries, including ESG factors, demanding that fiduciaries “act solely in the interest” of pension plan participants and beneficiaries and only undertake investment actions based on pecuniary factors.

If the bill becomes law, the limitations and documentation requirements for using non-pecuniary factors such as ESG would go into effect 12 months after its enactment.

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Key Client Takeaways:

US House Advances ESG Bill

• The House of Representatives narrowly approved HR 2988 in a 213–205 vote, moving forward legislation that would restrict pension fiduciaries to acting solely on pecuniary factors when selecting investments. The bill threatens to tighten the threshold for incorporating ESG considerations.

ESG Allowed Only as Tiebreaker

• The bill proposes to permit fiduciaries to consider ESG or other non‑pecuniary factors strictly as a tiebreaker when two investments are indistinguishable based on financial analysis alone, requiring detailed documentation explaining why pecuniary factors were insufficient to make the decision.

Anti-ESG Gains Little Investor Support

• Despite political rhetoric, anti-ESG proposals have struggled to resonate with shareholders, averaging just over 2% support during the 2025 proxy season — highlighting that investors continue to show limited appetite for anti-ESG agendas even as regulatory and political scrutiny intensifies.

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The bill was approved in a tight 213-205 vote which largely followed party lines. All 210 Republicans that voted opted to approve the bill, while all 205 opposing votes were from Democrats. Three Democrat Representatives broke ranks and voted for the bill.

The Bill will now be passed onto the US Senate, which will vote on it sometime in the coming months. Given the Senate comprises 53 Republican members, 47 Democrats and two independents it seems likely that the bill would be approved if it is voted on before the midterm elections scheduled for November. Following that, it would need to be signed by the President before becoming law.

The bill would not entirely exclude the ability of fiduciaries to consider non-pecuniary factors. It would only allow non-pecuniary factors to be considered if a fiduciary is “unable to distinguish between or among investment alternatives or investment courses of action on the basis of pecuniary factors alone.”  This would mean that ESG factors could only be incorporated in a tiebreaker scenario if the fiduciary documents  why they were unable to decide between two investments solely based on pecuniary factors.

The Protecting Prudent Investment of Retirement Savings Act would define pecuniary factors in ERISA as “a factor that a fiduciary prudently determines is expected to have a material effect on the risk or return of an investment based on appropriate investment horizons consistent with the plan’s investment objectives and the funding policy established”.

HR 2988 was introduced by Republican Representative Rick Allen in April, who claimed that the bill will “codify that retirement plan sponsors must make investment decisions solely based on financial returns—ensuring Americans’ hard-earned savings are invested sensibly”. It was passed by the House Committee on Education and Workforce in a 21-to-15 vote in June, as reported by Minerva Analytics. This vote saw all 21 Republican committee members vote for the act and all 15 Democrats vote against it.

Tim Walberg, the Republican Chairman of the Education and Workforce Committee, spoke in support of HR 2988 last week in the House of Representatives. He argued that ESG investing has “become a tool for advancing a broader political agenda”. Walberg added that the act “makes clear that exercising shareholder rights – including proxy votes – must be done in economic interest of plan participants. Not to advance radical political initiatives. Not to appease advocacy groups. And not to satisfy trends in corporate boardrooms.”

The anti-ESG movement seemed to gather momentum following the start of Donald Trump’s second term as US President in January 2025, at a rhetorical level at least, with several notable developments between HR 2988 being approved by the Education and Workforce Committee in June 2025 and the House of Representatives in January 2026.

In October, Paul Atkins, Chair of the US Securities and Exchange Commission (SEC), made remarks suggesting that Rule 14a-8 and state corporate law could be exploited to entirely exclude environmental- and social-focused shareholder proposals, as reported by Minerva Analytics. Under Atkins’ leadership, the SEC has tightened Rule 14a-8, raising the investment and support thresholds for shareholders to file and resubmit proposals.

Under Atkins, the SEC has also made the controversial decision to not respond to company ‘no action’ requests to exclude shareholder proposals during the 2026 proxy season, as reported by Minerva Analytics. Announced in November, the decision is expected to enable companies to disregard environmental- and social-related resolutions during the forthcoming proxy season, effectively allowing them to ignore ESG proposals, though anti-ESG resolutions may also be impacted.

However, during the 2025 proxy season the push against ESG seemingly had little impact on investors. During H1 2025 anti-ESG shareholder proposals averaged just over 2% of votes in favour at AGMs, according to Minerva Analytics’ Shareholder Proposal Voting Trends Report 2025.

Last month, President Trump introduced an executive order instructing the SEC to “review all rules, regulations, guidance, bulletins, and memoranda relating to proxy advisors”, as reported by Minerva Analytics. The order alleged that two “foreign-owned” proxy advisors “regularly” use their substantial power to advance and prioritise “radical politically-motivated agendas” such as ESG.

In July, 26 finance officials from 21 Republican-run US states wrote to several major asset managers – including BlackRock, JP Morgan and Vanguard, demanding that they scale back their ESG-related investment activities to continue business between the two parties and citing “deep concern” over the “erosion of traditional fiduciary duty” in American capital markets, as reported by Minerva Analytics.

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Last Updated: 20 January 2026