Interest in sustainable investing is soaring, as more people become convinced that making a positive impact can be profitable as well as good for the planet and society. Unfortunately, the Labor Department doesn’t think these investments belong in your 401(k).

In June, the federal regulator proposed a rule that would restrict workplace retirement plans from investments that include environmental, social and governance considerations. Popularly known as ESG or socially responsible investing, this approach considers the sustainability of a company’s business practices.

The Labor Department says only returns, not business practices, should matter. But its proposal is unusual for a number of reasons, including its wide range of opponents.

The rule has been denounced by some of the world’s largest investment managers, including BlackRock, Vanguard, State Street Global Advisors and Fidelity, along with groups representing pension funds and 401(k) providers. Many say the rule would make it so difficult or risky for workplace plans to offer ESGs that it effectively removes them from consideration.

The U.S. Chamber of Commerce, the American Bankers Association and the Investment Company Institute, among other business interests, warned the rule could raise costs, significantly limit investment options and increase the risk of lawsuits.

“This is out of step with mainstream investing,” says Aron Szapiro, director of policy research for investment research firm Morningstar.

“This is pretty unworkable and it’s logically inconsistent.” Far from acting in investors’ best interests, as workplace plan sponsors are required to do, the Labor Department seems determined to make retirement plans limit our options and potential returns.

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