Senate HELP Chair Cassidy introduces ESG legislation

On October 30, 2025, Senator Cassidy (R-LA), Chair of the Health, Education, Labor, & Pensions (HELP) Committee, together with Senator Banks (R-IN), (re)introduced the “Restoring Integrity in Fiduciary Duty Act.” This legislation is generally based on (Trump) Department of Labor 2020 guidance with respect to ESG investing and proxy voting. That regulation was revised in 2022 by the Biden DOL. Republican policymakers have been critical of those Biden-era changes, and this legislation, while not likely to be passed into law by the current Congress, highlights issues that are likely to be addressed in Trump Administration regulatory action, and it is those issues that we focus on in this article.

Background – proxy voting matters more than ESG investing.

As we’ve previously said, it’s likely that the issue of ESG-influenced proxy voting will be a more critical area of dispute than ESG investing. With respect to ESG investing, in a participant directed plan, participants can (as it were) “vote with their feet.” And in a DB plan, the consequences of any ESG investment that gets poor returns will have to be made up by the sponsor.

But a proxy voting policy that, e.g., aggressively pushes certain ESG objectives may have consequences for the broader economy. This is vividly illustrated in the American Airlines ESG litigation, which started its life as a challenge to the inclusion of ESG funds in American’s 401(k) plans but very soon morphed into a challenge to the ESG proxy voting policies of those plans’ index fund managers. Those policies, plaintiffs argued (in detail), were used to change the composition of Exxon’s board and to effect Exxon’s allocation of investment capital to ESG energy projects, to the (alleged) detriment of the value of Exxon stock (and energy sector capital allocation more broadly) held, e.g., by the plans’ S&P 500 index funds.

Underneath all of this is (among other things) a challenge by Republicans to the proxy voting policies of the two dominant proxy advisory firms (ISS and Glass Lewis), which they believe exercise an “outsized influence … on the proxy voting system,” have a “tendency to overlook the economic impact of shareholder proposals,” and “by prioritizing social and political issues over financial analysis, … can undermine the fundamental purpose of the proxy voting system.”

To avoid this ESG “index fund-to-proxy advisory firm pipeline,” the focus of Republicans has been (1) to get more fiduciary scrutiny of the proxy voting policies of index fund managers and proxy advisory firms and (2) to expand the situations in which it is “OK” under ERISA for a fiduciary not to take a side (not to vote a proxy) on an issue it views as immaterial to financial performance. Democrats (e.g., the Biden DOL) have opposed this effort. The “Restoring Integrity in Fiduciary Duty Act” reflects these concerns, and (as we said) may forecast what a Trump 2.0 DOL ESG regulation will look like.

General fiduciary proxy voting rules

Under the bill, in voting proxies, a fiduciary must comply with ERISA’s general prudence and loyalty rules and must:

• Act solely in accordance with the economic interest of the plan and its participants and beneficiaries

• Consider any costs involved

• Evaluate material facts that form the basis for any particular proxy vote or exercise of shareholder rights, and

• Maintain a record of any proxy vote, proxy voting activity, or other exercise of a shareholder right, including any attempt to influence management.

Furthermore, the fiduciary “shall not subordinate the interests of participants and beneficiaries in their retirement income or financial benefits under the plan to any nonpecuniary objective, or promote nonpecuniary benefits or goals unrelated to those financial interests of the plan’s participants and beneficiaries.”

The use of the word “pecuniary” (here and with respect to ESG investment decisions, discussed below) was also used in the Trump DOL 1.0 rule. It was subsequently deleted in the Biden DOL revision of those rules, with DOL noting that “investor confusion about [the term “pecuniary”], including whether climate change and other ESG factors may be treated as ‘pecuniary’ factors under the regulation, has already had a chilling effect on appropriate integration of climate change and other ESG factors in investment decisions.” For “pecuniary factors” the Biden DOL substituted the term “risk/return factors.”

When may a proxy not be voted?

The bill provides that ERISA’s fiduciary rules “[do] not require the voting of every proxy or the exercise of every shareholder right.”

Similar language was included in the Trump 1.0 DOL proxy voting rule, but was taken out by the Biden DOL revision, which stated that “the Department is concerned that [this] statement could be misread as suggesting that plan fiduciaries should be indifferent to the exercise of their rights as shareholders.”

Safe harbor “non-votes”

In a similar vein, the Trump 1.0 DOL identified two fiduciary “safe harbor” policies that sponsors could adopt, specifying circumstances in which plan-held shares would not be voted:

A policy limiting voting “to particular types of proposals that the fiduciary has prudently determined are substantially related to the issuer’s business activities or are expected to have a material effect on the value of the investment.”

A policy of not voting on proposals when the plan’s holding is below a prudently determined threshold.

The Biden DOL stripped this provision out in their revision of the Trump 1.0 DOL rule. The Restoring Integrity in Fiduciary Duty Act would restore these safe harbors.

Supervision of proxy voting/policies of managers and proxy advisory firms

The bill also provides for heightened fiduciary scrutiny (“exercise [of] prudence and diligence”) in choosing persons (e.g., advisory firms) “to advise or otherwise assist with the exercise of shareholder rights.” And where authority to vote proxies has been delegated to a fund manager or advisory firm, “a responsible plan fiduciary shall prudently monitor the proxy voting activities of such investment manager or advisory firm and determine whether such activities are in compliance with [the general fiduciary proxy voting requirements described above].”

ESG investing, very briefly

Summarizing the rules with respect to ESG investment –

Judgments based only on pecuniary factors

The bill provides that fiduciaries

• May evaluate investments “based only on pecuniary factors”

• May not subordinate participant retirement income/financial benefits to other objectives

• May not sacrifice return/take on risk “to promote nonpecuniary benefits or goals”

• Must weight pecuniary factors to reflect a prudent assessment of risk/return.

Exception – “coin flip” tiebreaker rule

Where the fiduciary determines that alternative investments are “indistinguishable” based on pecuniary factors, the fiduciary may select between them based on the capita aut navia standard (AKA a coin flip). This exception is subject to significant documentation requirements showing the financial equivalence of the two (or more) alternatives.

Participant-directed DC plans

An investment (e.g., an ESG fund) may be included in a participant directed DC plan if it satisfies ERISA duty of loyalty and prudence requirements and is not part of the plan’s default investment. Exclusion of ESG funds from the plan’s default investment was, again, a provision of the Trump 1.0 DOL rule that was deleted in the Biden DOL revision.

* * *

These issues are likely to be a regulatory (if not legislative) priority of the Trump Administration.