Lawmakers tussle over GOP efforts to thwart ESG investing

Rep. Patrick McHenry (R-NC) and Chairman of the House Financial Service Committee Maxine Waters (D-CA) listen as David Marcus, CEO of Facebook’s Calibra, testifies on “Examining Facebook’s Proposed Cryptocurrency and Its Impact on Consumers, Investors, and the American Financial System” on Capitol Hill in Washington, U.S., July 17, 2019.

Joshua Roberts | Reuters

WASHINGTON — House lawmakers clashed Wednesday over federally mandated environmental, social and governance disclosure requirements for companies rolled out amid concerns over growing climate disasters.

The Republican-held House Financial Services Committee met to consider a list of proposals that aim to strengthen public markets, among them a bill to require the U.S. Comptroller General to study the drawbacks of corporate sustainability reporting for public American companies. The measure would consider the long-term effects of the directives on social equity, the economy and environmental protection.

The GOP majority committee members decried the disclosure rules as part of a broader push to discourage ESG investing nationwide. Democrats defended them as necessary to promote responsible investing to reduce inequities and curb climate change.

Committee Chair Rep. Patrick McHenry said the Biden administration’s focus on climate-related policy through the Securities and Exchange Commission will discourage private companies from going public. He panned the agency’s March 2022 rule proposal to require such disclosures in registration statements and periodic reports.

“Rather than focusing on sound financial regulation, the SEC has turned its attention towards non-material, environmental, social and political issues,” McHenry, R-N.C., said. “These politically motivated regulations not only discouraged private companies from going public but also hinder the competitiveness of American public companies.”

Democratic Rep. Maxine Waters, meanwhile, criticized Republicans’ attempts to undermine what she called the federal government’s responsibility to hold public companies accountable for ESG.

“Today is the first of six hearings this month where Republicans will partner with a network of dark-money climate deniers and conspiracy theorists to wage their latest culture war against responsible investing and divert attention away from what really matters in people’s lives,” Waters, D-Calif., said in opening remarks. “The Republican effort to dismantle ESG is integral to their agenda to gut diversity and inclusion across the board.”

The SEC’s proposal, which mirrors stricter guidelines in the European Union, has met with pushback from businesses and shareholders. SEC Chair Gary Gensler said his agency is weighing changes to the plan based on 15,000 public comments.

The House and Senate passed a GOP-led bill in March to overturn a Labor Department rule permitting retirement fund managers to account for ESG-related factors when making investments on clients’ behalf. President Joe Biden vetoed the measure.

The hearing Wednesday gave Republicans another shot at undercutting the Biden administration’s ESG efforts.

“If ESG is capitalism, why do we need the government to interfere in the free market?” Rep. Andy Barr, R-Ky., asked during the hearing. “That’s what ESG is, that’s what the free market is doing.”

Benjamin Zycher, a senior fellow at conservative think tank the American Enterprise Institute, contended that federal regulators lack the power to make the investing rules. He testified that the SEC is becoming “part of the climate crusade” under Gensler.

“I don’t believe the SEC has the authority to promulgate any part of this rule,” Zycher said.

Other lawmakers called the disclosures essential as extreme weather wreaks more havoc around the country. Rep. Juan Vargas, D-Calif., called the timing of the hearing amid global climate disasters “fascinating.”

“Timing is everything. It really is fascinating to me that these bills are coming up right when the scientists are saying, ‘This is a disaster, and human beings are causing it because of the burning of fossil fuels,'” Vargas said.

“How in the hell can that not be material?” he added. “That’s what investors want to know.”


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