ESG investing: House Republicans outline policy goals in new interim report

House Republicans have launched a broadside at the Biden Administration’s emphasis on Environmental, Social and Governance investing, contending that regulators—particularly the SEC—are exceeding their power in making it a priority.

“Across the nation, boardrooms are being held hostage by those who push policies that will lower returns for Americans trying to build a brighter and more financially secure future, Rep. Bill Huizenga, R-Mich, chairman of the Republican Environmental, Social, and Governance Working Group, said as the group released its preliminary report.

“Today’s preliminary report is clear about one thing, the Biden Administration is making it harder for Americans to retire,” said Huizenga, who also chairs the House Financial Services Committee’s Oversight and Investigations Subcommittee.

The working group accused the Biden Administration of adopting a deliberate strategy to circumvent the lack of congressional support for certain ESG issues and charged that the administration is exploiting regulatory agencies to impose its policy priorities.

For instance, the report states that that the SEC has exceeded its statutory authority by mandating non-material ESG disclosures through regulations—a shortcut through the legislative process.

The working group singled out SEC Chairman Gary Gensler, accusing the chairman of pushing for changes to the 2020 guidance on proxy voting.

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The SEC does not have the legal authority to enforce climate-focused regulations, the task force said.

It added that “Shareholders have the right to protect their investments and participate in corporate decision-making. However, the SEC rules have allowed social activists to abuse the proxy system.”

House committee chairmen have blasted Gensler’s leadership on numerous occasions. Most recently, three committee chairmen accused Gensler of failing to comply with federal record-keeping laws.

The group said that shareholders with very few shares of company stock have submitted hundreds of resolutions related to ESG issues, rather than focusing on company growth and competitiveness.

The task force also said that:

• The proxy voting system is in dire need of changes to strengthen shareholder engagement.
• The SEC is misusing the “No-Action Letter” to focus on agency priorities.
• The influence of proxy advisory firms is a growing concern, with the companies emphasizing political, rather than economic issues. “This disregard for economic considerations can have detrimental consequences for retail investors, who rely on the financial success of the companies they invest in,” the working group said.
• Three asset managers – Vanguard, State Street Global Advisors and BlackRock, knows as the “Big Three” – collectively manage $20 trillion in assets. Those firms, the working group said, should be reviewed by Congress to determine how much influence they have over management and corporate policies.