President Joe Biden has signed an executive order on climate-related financial risk that includes a directive to the Labor secretary to consider suspending, revising or rescinding the “Financial Factors in Selecting Plan Investments” final rule regarding environmental, social and governance (ESG) investments that was published during the last days of the Trump administration.

The executive order might not come as a surprise to some in the retirement plan business, as shortly after Biden was elected president, industry insiders said they expected him to champion ESG investing in retirement plans.

The final rule the Department of Labor (DOL) implemented in November set forth the guidance that retirement plan sponsors should only consider “pecuniary,” or performance-related, factors when selecting investments for their investment lineup, rather than expressly limiting the use of ESG funds. It took a softer stance than the initial proposed rule, which drew intense criticism. And shortly after the rule was passed, many in the industry applauded it as paving the way for more ESG investing in retirement plans.

However, in a blog post on Stradley Ronan’s website, George Michael Gerstein, an attorney and co-chair of the firm’s fiduciary governance and ESG groups, says the Financial Factors rule could prevent some retirement plan sponsors from offering ESG funds and that the executive order could be a game-changer.

“It is a big deal that, with a rescission of the Financial Factors rule, fiduciaries would seemingly no longer have to comb through a fund’s prospectus and marketing materials for references to non-pecuniary factors, nor would the fiduciary need to scrutinize a fund manager’s use of screens or ratings,” Gerstein writes. “These requirements obviously present legal risk to a fiduciary and, therefore, may deter some fiduciaries from considering ESG products.”

Biden’s executive order also asks Labor Secretary Marty Walsh to identify what actions the DOL can take under the Employee Retirement Income Security Act (ERISA) and the Federal Employees’ Retirement System Act to “protect the life savings and pensions of United States workers and families from the threats of climate-related financial risk.”

It also asks the secretary to assess “how the Federal Retirement Thrift Investment Board has taken environmental, social and governance factors, including climate-related financial risk, into account.”

Walsh is directed to submit a report to the president on the actions taken in response to the executive order within 180 days.

The executive order comes after Biden, shortly after taking office, asked the DOL to review the Financial Factors rule. In mid-March, the DOL’s Employee Benefits Security Administration (EBSA) announced it would not enforce the final rule. At the time, it said it would offer more guidance down the line.

In sum, Gerstein says, “ESG is and will remain entirely relevant to ERISA fiduciaries. Under ERISA and existing guidance, fiduciaries may take ESG factors into account when investing plan assets or selecting investment options for a plan lineup. With ESG top of mind for the current Congress and White House, ERISA fiduciaries should continue to evaluate whether taking ESG into account is prudent under the circumstances.”

Meanwhile, U.S. Senators Tina Smith, D-Minnesota, and Patty Murray, D-Washington, and U.S. Representative Suzan DelBene, D-Washington, have introduced legislation in both chambers of Congress, the Financial Factors in Selecting Retirement Plan Investments Act, that they say would provide legal certainty to workplace retirement plans that choose to consider ESG factors in their investment decisions or offer ESG investment options. Their legislation would also formally repeal the Trump-era DOL rule on pecuniary factors.

The lawmakers’ bill certainly is timely, as it is widely expected that demand for ESG investing, particularly among Millennials, will only increase.