Lawmakers tussle over GOP efforts to thwart ESG investing

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

The Republican-held House Financial Services Committee met to contemplate an inventory of proposals that aim to strengthen public markets, amongst them a bill to require the U.S. Comptroller General to check the drawbacks of corporate sustainability reporting for public American firms. 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 a part of a broader push to discourage ESG investing nationwide. Democrats defended them as essential to advertise responsible investing to scale back inequities and curb climate change.

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

“Quite than specializing in 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 firms from going public but additionally hinder the competitiveness of American public firms.”

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

“Today is the primary 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 within 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 aspects when making investments on clients’ behalf. President Joe Biden vetoed the measure.

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

“If ESG is capitalism, why do we want the federal government to interfere within the free market?” Rep. Andy Barr, R-Ky., asked in the course of the hearing. “That is what ESG is, that is 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 ability to make the investing rules. He testified that the SEC is becoming “a part of the climate crusade” under Gensler.

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

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

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

“How within the hell can that not be material?” he added. “That is what investors need to know.”