More than a dozen Democratic members of the U.S. Senate have filed and openly published a comment letter addressed to Department of Labor (DOL) Secretary Eugene Scalia, calling on the regulator to dial back its proposed rule seeking to restrict the use of environmental, social and governance (ESG)-themed investments within tax qualified retirement plans governed by the Employee Retirement Income Security Act (ERISA).

The comment letter was published exactly halfway through the 30 day comment period allowed by the DOL, which ends on July 30. Any other interested parties may file their formal comments here.

Senator Patty Murray, D-Washington, ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee, penned the letter, alongside her colleague, Senator Tina Smith, D-Minnesota. Ten other Democratic senators signed the letter, including Ohio’s Sherrod Brown, New York’s Kirsten Gillibrand, Virginia’s Tim Kaine, Massachusetts’ Elizabeth Warren, Wisconsin’s Tammy Baldwin, Pennsylvania’s Bob Casey, Illinois’ Dick Durbin, Minnesota’s Amy Klobuchar, New Jersey’s Cory Booker and California’s Dianne Feinstein. Vermont’s Bernie Sanders, an independent, also signed the letter.

In the comment letter, the Democratic lawmakers say the rule as proposed will unduly discourage financial advisers from considering ESG criteria as they go about their business serving retirement plan investors. They urge the DOL to wholly withdraw its proposed rule, emphasizing how ESG investing can be important in considering practices that can impact a company’s performance. The letter points to factors such as greater diversity, and discusses how it can serve as a tool for long-term change in the fight against problems such as racial and economic inequality.

“We are at pivotal moment in the fight against systemic racism in our country,” the letter states. “Yet, while people across the country demand accountability and reach for available tools to fight for racial and economic equity—from advocating for sweeping federal reforms to address systemic racism to taking smaller personal steps like supporting Black-owned businesses—the [DOL] is moving in the opposite direction. … By restricting ESG investing, the [DOL’s] proposal would undermine a powerful tool that leverages trillions of dollars a year to drive positive social change.”

Simply put, the senators believe plan sponsors and fiduciaries “should be able to consider whether or not companies have established diverse leadership teams, whether they foster inclusive or discriminatory workplaces, and whether they engage in a variety of other practices that may impact a company’s performance.”

“ESG-based investing is a key way to grow a plan’s assets in a manner consistent with its corporate principles without sacrificing investment returns,” the letter states. “Racial justice, corporate diversity and other ESG factors are increasingly a consideration in investment decisions. Further, contrary to the skepticism and assumptions underlying the department’s proposed rule, ESG investments often outperform traditional investments and the overall financial markets, including over the past several years, showing investors can both achieve strong returns while driving positive change.”

In filing their comments, the Democratic senators join in a chorus of concerned stakeholders.

In a statement about the proposed rule shared shortly after its publication, Robert Smith, president and chief investment officer (CIO) of Sage Advisory Services in Austin, Texas, said, “The language is written in such a way that ESG-oriented funds are given second-class status when considering investment alternatives for a plan.” Smith pointed out that Millennial investors and defined contribution (DC) plan participants in general “would prefer a choice architecture that better reflects their investment attitudes and goals.” He concluded, “We are not sure this statement truly reflects those well-supported long-term demographic trends that will continue to affect the DC plan world in the future.”

Striking a similar tone, Lisa Woll, CEO of the U.S. Forum for Sustainable and Responsible Investment (US SIF) in Washington, D.C., shared the following statement: “The proposed rule suggests, but without evidence, that the growing emphasis on ESG investing may be prompting plan fiduciaries to make investment decisions for purposes distinct from providing benefits to participants and beneficiaries and defraying reasonable expenses of administering the plan. However, the DOL proposal is out of step with professional investment managers, who increasingly analyze ESG factors precisely because of risk, return and fiduciary considerations.”

Woll noted that three-quarters of asset managers polled by US SIF in 2018 cited the desire to improve returns and to minimize risk over time as motivations for incorporating ESG criteria into their investment process. Fifty-eight percent of asset managers cited their fiduciary duty obligations as a motivation.