Labor & Employment Law Daily Wrap Up, FEDERAL LEGISLATION—Bill restricting use of ESG considerations in private retirement plans passes house, (Jan 20, 2026)

By Patricia K. Ruiz, J.D.

The bill would limit fiduciaries’ use of non-pecuniary factors in investment decisions.

The U.S. House of Representatives advanced the Protecting Prudent Investment of Retirement Savings Act (H.R. 2988), legislation intended to reinforce traditional fiduciary obligations and restrict the use of environmental, social, and governance (ESG) considerations in private retirement plans. According to a Congressional Budget Office (CBO) analysis, the measure would significantly clarify how fiduciaries may evaluate investment options and exercise shareholder rights, while imposing new disclosure obligations on plans offering brokerage windows.

H.R. 2988. The bill would amend the Employee Retirement Income Security Act of 1974 (ERISA) to establish explicit statutory standards governing fiduciaries’ use of pecuniary and non pecuniary factors in investment decisions. The bill is divided into several titles that address different aspects of fiduciary conduct. Division A would limit fiduciaries’ use of non pecuniary considerations and reaffirm that investment choices must be guided by the goal of maximizing financial returns. Division B would address service provider selection to prevent discrimination unrelated to financial performance. Division C would set rules for the exercise of shareholder rights, including proxy voting, ensuring that such activities remain tied to beneficiaries’ financial interests. Finally, Division D would require expanded disclosures for brokerage windows to ensure that retirement investors have complete and clear information when directing their own investments. Collectively, these provisions would restrict the use of ESG criteria and impose more stringent return focused fiduciary standards.

CBO findings. The CBO reported that H.R. 2988 would reinstate and strengthen requirements directing pension plan fiduciaries to base decisions solely on pecuniary considerations. Under the bill, fiduciaries would be limited in their ability to account for ESG factors and would be prohibited from using non financial characteristics—such as race or sex—in the hiring or retention of pension plan employees. Additionally, the bill would require enhanced disclosures for plan participants using brokerage windows. The CBO found that the measure would have no effect on net direct spending or revenues from 2025 2035, and that implementation would increase discretionary spending by less than $500,000, subject to appropriations.

Reactions. Committee Republicans praised the bill, framing it as a necessary corrective to ensure that fiduciaries remained focused on maximizing returns. Education and Workforce Committee Chairman Tim Walberg (R-MI) applauded House passage of the legislation, arguing that it protected workers’ retirement income from what he characterized as politically motivated ESG agendas. In contrast, Ranking Member Bobby Scott (D-VA) criticized the bill, arguing that it imposed unjustified barriers preventing fiduciaries from considering legitimate ESG related financial risks—such as climate driven impacts on real estate or governance failures affecting company performance. He contended that the measure undermined retirement security by codifying overly rigid rules first imposed during the Trump administration and abandoning the more flexible standards permitted under the Biden administration, which allowed fiduciaries to weigh ESG factors when financially relevant.

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