House lawmakers launch sustainable investment caucus to address ESG investing

Congressional proponents of environmental, social and governance investing have formed the Congressional Sustainable Investment Caucus. Rep. Juan Vargas, D-Calif., and Rep. Sean Casten, D-Ill., will lead the group.

“Given the significant growth of assets under management in funds that prioritize ESG factors, Congress has a duty to craft policies that provide investor protections and transparency of information to market participants,” Casten said. “I’m excited to partner with Rep. Vargas to bring together members of Congress and experts to progress past the distortion of facts and have robust, open-minded discussions about sustainable investing.”

The objectives of the caucus are:

• Educate members of Congress about the market-driven benefits of sustainable investment and inform policymaking that provides investor protections and market transparency
• Hold regularly scheduled events, briefings and discussions with investors, fund managers, companies and regulators
• Support the ability of federal agencies to advance proposals, rules and regulations that recognize the importance of using ESG criteria in the investment process.

Related: Need more clarity on sustainable investing (even with DOL’s final ESG rule)

ESG investing has drawn broad interest in the financial sector as well as rising opposition in states such as Texas, Kentucky, Florida and West Virginia and some Republicans in Congress.

More than $8.4 trillion was invested in U.S. sustainable assets at the beginning of 2022, according to US SIF: The Forum for Sustainable and Responsible Investment. This represents 13% of total U.S. assets under professional management. About $3 trillion of U.S. sustainability funds were directed toward fighting climate change and cutting carbon emissions as of the end of 2022. Another $1.2 trillion is in funds that are excluded from investing in fossil fuel. However, ESG goes well beyond environmental investing, and trillions more are invested in funds that seek to avoid human rights violations or tolerating corporate mis-governance.

Along with US SIF, groups endorsing the formation of the caucus include the American Sustainable Business Network, As You Sow, Ceres, Green America, Impact Capital Managers Inc., Interfaith Center on Corporate Responsibility, Northwest Coalition for Responsible Investment, Tobacco Free Portfolios and the US Impact Investing Alliance.

“Today’s launch takes place in the midst of a highly politicized environment in which there have been uninformed critiques of the field by some state and national officials,” says Lisa Woll, CEO of US SIF. “To be clear, sustainable investment is in the mainstream of finance, because investors that don’t account for the environmental, social and governance practices and policies of the companies they invest in are not adequately assessing risk and missing an opportunity to both make better investments and to contribute to a more sustainable economy.”