The batsh*t case to appeal an ESG win
Filed under legal and political insanity — but not because it's wrong
On Valentine’s Day, a Trump-appointed judge in a red state reaffirmed his own 2023 decision: ERISA-governed pensions can consider ESG factors, but only under a hyper-specific, practically nonexistent scenario.
U.S. District Judge Matthew Kacsmaryk, in State of Utah et al. v. Micone et al., ruled that fiduciaries may use environmental, social, and governance (ESG) criteria as a tiebreaker between two investments that are “economically indistinguishable.” He wrote:
“When a fiduciary comes to competing investment courses of action that ‘equally serve the financial interests of the plan over the appropriate time horizon,’ the fiduciary may look to ‘collateral benefits other than investment returns’ to select the best plan.”
I dismantle that decision below. However, the top line is that ESG won and the coalition of 26 anti-ESG states lost. Technically. This ruling confines ESG to a tiebreaker scenario — one that rarely, if ever, occurs — rather than recognizing it as a legitimate financial consideration in all fiduciary decisions.
A hollow victory solving nothing
Imagine you have a serious illness, and a cure exists — but you’re only allowed to consider treatment if two doctors independently provide a medically equivalent prognosis in substance, severity, and expected outcome. If one doctor diagnoses you with Stage 2 and the other with Stage 4, the cure is off the table.
That’s the logic of this ruling.
If ESG factors are legitimate financial risk considerations in a tiebreaker scenario, why aren’t they legitimate in all cases?
If ESG data provides meaningful insight into financial risk, why is its use restricted to an artificial deadlock between two investments?
How can fiduciaries justify ignoring material risks simply because an identical investment isn’t available for comparison?
A real victory would have provided clarity on how fiduciaries should balance risk as the very definition of risk evolves — differently across distinct classes of beneficiaries — as new facts prevail. The risk profile of a plan’s youngest new hire, whose retirement security depends on how decisions made today unfold over decades of economic and climate uncertainty, is not the same as a retiree drawing benefits now.
This ruling offers no guidance on how to reconcile those differences. It dodges real fiduciary dilemmas, and leaves a gaping hole in ERISA’s modern interpretation. It fails to address how billions — and trillions — of dollars move in sync or in conflict with future climate security.
Which leads to a nutty conclusion: If the Department of Labor or Department of Justice wanted real clarity about fiduciary autonomy, they would need to appeal the case they just won. Fiduciaries of affected pensions could, in theory, apply pressure to make that happen — but not in the world we live in.
Why would anyone appeal a win?
Because Utah et al. (the losing side) has already appealed, the DOL (the winning side) technically has the option to file a cross-appeal.
Calling it a long shot is an understatement. Still, we’re exploring the crazy ideas to expose the real problem — that fiduciary duty compliance is so muddled that even a win doesn’t resolve key legal ambiguities. The winning side can file a cross-appeal if they believe the ruling contains an error in law or leaves ambiguity that could create future legal uncertainty—but it’s so rare, I can’t find a precedent for it. Yet it may be the only way to force the judiciary to confront the critical ambiguity it just ignored:
Who does “equal service to the plan” prioritize when different groups have different financial needs?
What happens when short-term retirees want one thing and younger workers need another?
What is an “appropriate time horizon” — next quarter, next decade, or three decades from now when today’s youngest workers retire?
What is the test or definition of a “collateral benefit”? This ruling offers fiduciaries no guidance on when ESG factors are merely secondary and non pecuniary versus financially material and integral to prudent decision-making.
Right now, fiduciaries are left with a ruling that says:
You can consider ESG — but only in a scenario that never happens.
You must serve all beneficiaries equally — but we won’t tell you what that actually means.
You must act in the best interest of the plan — but we won’t clarify how that applies when different groups have competing interests.
Do fiduciaries even need clarity?
No. The problem isn’t the law — it’s fiduciary compliance.
A fiduciary is legally obligated to exercise prudent discretion within the limits of their trust agreement. That may sound squishy, but the law sets clear minimums that, we argue, are not being met. Under ERISA, that duty is defined as:
“… the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.”
In short: What would a jury of peers — tasked with representing a diversity of competing interests with impartiality — consider the smart play, regardless of political agendas or other external pressures trying to influence how the biggest aggregate funds on the planet move their money in today’s economy? Because that money isn’t just capital — it’s power to change the world.
What’s more, fiduciary law already enshrines the autonomy of fiduciaries to make prudent decisions — not based on political interference, nor on ideological framings of risk-adjusted returns or ESG, but on what’s truly right for their charges. A sacred legal independence should ensure that fiduciaries of ERISA-governed plans — and those managing vast pension funds everywhere — are free from this kind of court or legislative interference.
In practice, though, interference happens anyway and will continue until fiduciaries themselves demand the autonomy they already have to do their jobs. That’s what a successful cross-appeal could force into focus if fiduciaries, or the DOJ defending them, were willing to demand it.
A successful cross-appeal wouldn’t just eliminate ambiguity, it would expose the chasm between what fiduciary law requires and how fiduciary practice operates in ways that actively undermine the future of its own beneficiaries.
The theater around the law distracts from the real issue: How fiduciary practice is increasingly shaped by legal uncertainty rather than financial prudence. Courts, politicians, asset managers, and even “sustainable finance” advocates who remain trapped in capital market logic have overcomplicated what should be a straightforward fiduciary duty.
The result? Global fiduciary best practice has been reduced to something non-fiduciary — except inside the status quo echo chamber that apparently includes Judge Kacsmaryk.
So no, there won’t be an appeal
Along with concerns that Trump will issue a blanket anti-ESG executive order, restricting or outright prohibiting ESG considerations in federal pension funds and financial regulations:
1. The Fifth Circuit could gut ESG further
The Fifth Circuit Court of Appeals (one of the most conservative in the country) could take this opportunity to further restrict fiduciary discretion and outright prohibit ESG considerations.2. The Supreme Court could use this case to undermine fiduciary law
The conservative-majority Supreme Court could take this as an opportunity to reinterpret ERISA even more narrowly, possibly barring ESG from pension funds entirely.3. The ruling is “Good Enough” politically
Trump’s Acting Labor Secretary, Vince Micone, won’t appeal this case — not because it’s good law, but because it looks like a win for the other guy. To the public, it appears that the courts have upheld ESG discretion, even if the ruling is too narrow to mean anything.
That doesn’t mean we can ignore the real issue: What does it actually mean for fiduciary choices to “equally serve the financial interests of the plan over the appropriate time horizon”? The world is still starved for consequential long-term thinking — a job pension fiduciaries are uniquely positioned to do, with the mission, duty, and financial scale to back it. But they don’t. Not yet.
That’s the conversation that really matters.