Republican and Democrat lawmakers in recent weeks have been targeting the Biden administration's environment, social and governance (ESG) investment priorities, and they are warning Americans that these priorities may be working against their financial goals.

ESG standards are increasingly used by investors and asset managers to guide their decision-making. The environmental factors considered often include how a corporation contributes to pollution or climate change.

Social criteria examines a company's relationship with employees, ethics, engagement with nonprofits and stake in the community. Governance considers the corporation's leadership, overall ethics and standards, and it includes the makeup of the board of directors and the recipients of their donations.

Experts previously told Fox News Digital that ESG is often difficult to fully define because it's dependent on personal interpretation. There were more than 600 ESG raters and rating systems globally as of 2018, according to the Sustainability Institute from ERM.

ALL GOP SENATORS, MANCHIN CHALLENGE BIDEN'S ESG CLIMATE INVESTMENT RULE 'POLITICIZING' AMERICANS' 401(K)s

Joe Biden Climate Change

President Joe Biden delivers remarks on climate change and renewable energy at the site of the former Brayton Point Power Station in Somerset, Massachusetts, July 20, 2022. (Reuters / Jonathan Ernst)

An increased focus on ESG reporting and investing has led brokerage firms and mutual fund companies to offer financial products dedicated to ESG investing. There are now nearly 700 ESG exchange-traded funds in the United States alone, according to Fortune.

More than 90% of S&P 500 companies and 70% of Russell 1000 Index companies provide ESG reports, according to a 2021 Governance and Accountability Institute report.

The federal government under President Joe Biden has also indicated that ESG is a top priority for the administration. The Biden administration's Department of Labor unveiled a rule in November, which went into effect on Jan. 30, that allows managers to factor environmental and social issues into investment decisions for the retirement funds of more than 152 million Americans.

25 STATES HIT BIDEN ADMIN WITH LAWSUIT OVER CLIMATE ACTION TARGETING AMERICANS' RETIREMENT SAVINGS

On Wednesday, Sen. Joe Manchin, D-W.Va., joined every single GOP senator in introducing a disapproval resolution to stop this rule.

Manchin told Fox News Digital in a statement, "At a time when our country is already facing economic uncertainty, record inflation and increasing energy costs, it is irresponsible of the Biden Administration to jeopardize retirement savings for more than 150 million Americans for purely political purposes."

A recent study conducted by UCLA and NYU discovered that over the period of the last five years, ESG funds underperformed compared to the broader market at an average of 6.3% to 8.9%.

Allen Mendenhall, associate dean and Grady Rosier professor in the Sorrell College of Business at Troy University, told Fox News last year that investing used to focus on placing assets where they will "yield the most returns or on the basis of financial performance." But he said investment companies are using ESG criteria to expand those responsibilities to "include climate change and using their proxy power to strong-arm companies at the board level."

esg joe manchin

Sen. Joe Manchin, D-W.Va., joined every single GOP senator in introducing a disapproval resolution to stop this rule by the Biden administration.

BANK CEOs TO FACE CONSEQUENCES OF ‘PLAYING POLITICAL GAMES’ OVER ESG ISSUES: FL BANKING EXEC

A group of 25 states last week filed a federal lawsuit against the Department of Labor (DOL) over the rule, which Utah Attorney General Sean Reyes said would put millions of Americans' safety net retirement plans "at risk."

In the lawsuit, the states allege that the DOL violated the Employee Retirement Income Security Act (ERISA) of 1974. The law sets standards for the retirement income of 152 million U.S. workers, equivalent to more than two-thirds of the nation's adult population and applies to roughly $12 trillion in assets.

BANKS, ASSET MANAGERS SHOULD IGNORE CALLS FOR ESG AND WOKE CAPITALISM AND STICK TO WHAT THEY DO BEST

Sen. Kevin Cramer, R-N.D., wrote in a Fox News op-ed last year that banks and asset managers should ignore calls for ESG and "woke" capitalism and stick to what they do best.

"The calls for environmental, social and corporate governance (ESG) in the financial industry are a public relations ploy more focused on placating ‘Twitter risk’ than any material risk to investors," he wrote.

Sen. John Thune, R-S.D., warned Biden in a letter in December about a Securities and Exchange Commission (SEC) proposed climate-disclosure rule that would not only require registrants to disclose information about their own greenhouse gas emissions but, in many cases, report indirect emissions "from upstream and downstream activities (i.e., their suppliers and customers)" in their value chain – known as scope 3 emissions.

Thune called the SEC rule an "overreach" and said that it would "almost certainly reduce or potentially even eliminate businesses’ access to the resources they need to operate, as it would discourage firms from investing in or extending capital to them."

Sen. John Thune at a news coneference

Sen. John Thune, R-S.D., warned President Biden in a letter in December about a Securities and Exchange Commission proposed climate-disclosure rule. (Eric Lee / Bloomberg via Getty Images / File)

"Equally alarming," Thune said, is the recently proposed Federal Supplier Climate Risks and Resilience Rule that would require certain federal contractors to publicly disclose not only their greenhouse gas emissions but also their scope 3 emissions, compounding the burden imposed by the SEC.

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The senator also warned about the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Federal Reserve, which have all published draft principles for climate-related financial risk management for large banks.

Fox News' Brianna Herlihy and Kelsey Koberg contributed to this report.