Rep. Andy Barr, R-Ky., center, Speaker of the House Kevin McCarthy, R-Calif., right, and Rep. Bill Huizenga, R-Mich., attend a signing ceremony for a resolution that disapproves of a rule related to the “Prudence and Loyalty in Choosing Plan Investments and Exercising Shareholder Rights, within the U.S. Capitol on Thursday, March 9, 2023.
Tom Williams | CQ-Roll Call, Inc. | Getty Images
House Republicans are continuing their try and pump the brakes on so-called “woke” investing with recent laws that might place limits on financial advisors and retirement funds.
Rep. Andy Barr, R-Ky., will introduce a bill Wednesday that will goal funds that consider environmental, social and governance issues, often called ESG. Barr’s measure would update the Worker Retirement Income Security Act to require retirement funds to focus only on maximizing profits, limiting the flexibility to speculate in ESG options.
Retail investors would also must be notified if their financial advisors invested their funds in an ESG. As well as, advisors would want to reveal the difference in fees and performance between ESG funds and an identical index. Proponents say ESG investing is meant to advertise the social good, although critics say it hurts investors.
“Environmental, social and governance investing has grow to be a cancer and a fraud inside our capital markets, steering retail investors, sometimes unwittingly, into lower-performing, less diversified and higher-fee funds,” Barr told CNBC.
Barr’s bill doesn’t specifically block funds from being invested in ESG options. Fairly, his goal is to make sure investors’ returns are prioritized ahead of social and environmental goals. Those that want to speculate in ESGs would give you the chance to accomplish that but they would want to supply consent in writing.
Republicans have already sought to limit investments in ESG. Earlier this 12 months, each chambers of Congress voted to roll back a Biden administration rule allowing fiduciaries to contemplate ESG aspects once they make investment decisions. Three Democrats — Rep. Jared Golden and Sens. Joe Manchin and Jon Tester — supported the rollback. President Joe Biden ultimately vetoed the bill, and an try and override it fell short. Similar laws Barr previously introduced was sponsored by Republicans but not Democrats.
While Barr’s broader ESG bill is unlikely to make it to Biden’s desk and even to the Senate, it could possibly be a component of a bigger effort Republicans on the House Financial Services Committee will make to spotlight concerns around ESG investing in July. Barr, who’s a senior member of the committee, said several hearings are planned on the subject, in addition to a package of bills.
“Whether you’re a Republican, a moderate or a Democrat, or conservative or liberal, we’re attempting to depoliticize investing in America,” Barr said. “Your 401(k), your 529, your investment account should give you the results you want. It should deliver returns. It should not be a compulsory political statement.”
The federal push comes as several Republican-controlled states have implemented or are considering similar limits to ESG funding. Those jurisdictions includes Barr’s home state of Kentucky, where Democratic Gov. Andy Beshear signed certainly one of the strongest anti-ESG laws, mandating the state’s fiduciaries to maximise profit.
Rep. Brad Sherman, a California Democrat on the House Financial Services Committee, said the federal government shouldn’t interfere with how states want to speculate various funds.
“I feel in democracy. States get to do what states need to do,” he said.
