Few would have predicted at the beginning of the Biden administration that a relatively niche issue from the world of finance would be the subject of the President’s first veto. Yet, on Monday, President Biden flexed his executive muscles by striking down a resolution to remove Department of Labor guidance that allows investment managers to consider issues such as climate change-related risks in their investment decisions—a bill that achieved majority support in the House and the Senate earlier this month.
ESG (that is, Environmental, Social, and Governance) investing may perhaps be better understood as “responsible investment.” It’s the school of thought which holds that issues related to those three areas have material impacts on the performance of investments. Its application encompasses institutional money around the world, including millions of Americans’ 401k savings, to the tune of hundreds of trillions of dollars.
The concept of responsible investment has evolved into a mainstay of finance–and with good reason. As Treasury Secretary Janet Yellen recently warned, the effects of climate change, natural disasters, and warming temperatures will cause a decline in asset values that could have a cascading effect on the global financial system. The performance of the economy is inexorably linked to our changing environment and society.
At face value, investors taking into account how these issues may affect returns may seem uncontroversial. However, over recent months, responsible investment has found itself in the crosshairs of the culture war, culminating in the proposed legislation that found itself on President Biden’s desk.
From state legislatures to Congress, bills aiming to stymie the ability of investors to consider ESG factors have begun to pick up steam. States including Texas, West Virginia, and Florida have enacted laws limiting or banning the flow of public money to firms that consider ESG issues in their decision-making. Twenty governors across the country have formed an alliance to use their state pensions as ways to undercut ESG. Responsible investing has been cast as the result of “woke capitalism” weaseling its insidious way into the economy.
One of the forces behind this backlash is the fossil fuels industry. They see ESG investing as a threat–and believe that curbing its influence will keep investors’ money tied up in their businesses. This perspective misses a key point: responsible investment is about mitigating risk and identifying new opportunities for growth. These are things that the entire economy should benefit from. Instead of looking at ESG investing as a zero-sum game they can’t afford to lose, the fossil fuel industry should recognize the incentives they have to work with–rather than against–investors.
ESG investing is inherently apolitical. It holds that investors are more likely to succeed when they consider all potentially economically relevant and useful information in their investment decisions. Failing to do so could well be a dereliction of their fiduciary duty. When passed, the DOL’s rule provided much-needed certainty on this, simply by stating that investors could consider all factors they deem appropriate to accomplish their clients’ goals.
To take one example, and as Secretary Yellen noted, billion-dollar weather events in the United States have increased five-fold from just 40 years ago. A prudent person would consider this information to be valuable. To ignore that fact, or to downplay the future implications of this trend, belies the common standard for fiduciary considerations. It’s equally imprudent to ignore the positive impacts a diverse workforce has on company success or the legal and reputational risks from having human rights violations such as child labor in one’s supply chain.
The Department of Labor’s rule simply clarifies that prudent investors should continue to be prudent, and unobstructed by bias, stating, “[a] fiduciary’s determination with respect to an investment or investment course of action must be based on factors that the fiduciary reasonably determines are relevant to a risk and return analysis.”
At the core of the debate is not some technical peculiarity of the financial world. It’s a fundamental question about the role of investment professionals and the functioning of a free market economy–a debate now drawn along partisan lines to determine how Americans’ money is managed.
Undoubtedly, there are questions around what the best way to do ESG investing is, and we should welcome that debate. But the core facts are clear, and the question we should be asking is not whether financial firms should consider ESG issues, but rather how could they not?
David Atkin is the CEO of the Principles for Responsible Investment (PRI).
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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