The House Financial Services Committee Republicans have posted a report on ESG entitled, “The Failure of ESG: An Examination of Environmental, Social and Governance Factors in the American Boardroom and Needed Reforms.”
In recent years, ESG has infiltrated corporate America as well as the political arena, infusing businesses, including financial services, with identity politics and social policy goals. The divisive concept has also manifested itself in the regulatory environment with the Securities and Exchange Commission’s attempt to foist climate rules on public firms – clearly veering from its statutory mandate while dramatically increasing compliance costs for reporting firms.
The report highlights the SEC’s abuse of office, stating that the [climate] rule “remains an onerous, costly, and ineffective means to dictate climate policy. Unfortunately, the SEC is not the only one inappropriately exploiting these frameworks to achieve climate policy goals. For example, California—the largest state in the country—has adopted rules that are more burdensome, and even farther-reaching, than the SEC’s rule. Likewise, the European Union has advanced climate-related corporate disclosure directives that would apply to American businesses for activities that occur within the United States.”
The Committee’s ESG Working Group is described as being created to protect the interests of everyday investors.
Key priorities include:
- Reform the proxy voting system to safeguard the interests of retail investors.
- Promote transparency, accountability, and accuracy in the proxy advisory system.
- Enhance accountability in shareholder voting by aligning voting decisions with the economic interests of shareholders.
- Increase transparency and oversight of large asset managers to ensure their practices reflect the pecuniary interest of retail investors.
- Improve ESG rating agency accountability and transparency to safeguard retail shareholders.
- Strengthen oversight and conduct thorough investigations into federal regulatory efforts that would contort our financial system into a vehicle to implement climate policy.
- Demand transparency, responsibility, and adherence to statutory limits from financial and consumer regulatory agencies.
- Protect U.S. companies from burdensome European Union (“EU”) regulations, safeguarding American interests in global markets.
Representative Patrick McHenry, the Chairman of the House Financial Services Committee, issued the following statement on the report:
“Politically motivated ESG mandates put Americans’ financial security at risk and have no place in corporate boardrooms. The Committee’s ESG Working Group report supports this fact as well as provides recommendations to address the failures of progressive environmental and social policy goals. I commend Subcommittee Chairman Bill Huizenga for leading the charge on this important work in his capacity as the leader of the Working Group. Our committee will continue to work to ensure that progressive priorities are not placed above the interests of shareholders, sound corporate governance, or the strength of U.S. capital markets.”
