New Republican Working Group Interim Report Takes Aim at ESG

The Republican Environmental, Social, and Governance (ESG) Working Group released its interim report (pdf) highlighting several of the GOP’s policy priorities that conservative lawmakers say will “benefit all Americans, not just those seeking to push their far-left agenda.”

Working Group members say that President Joe Biden and his administration have strategically circumvented the paucity of congressional support for ESG policy issues and are “exploiting financial regulatory agencies to impose their policy and other ESG-related priorities on the private sector.”

One of the tactics outlined by the report is to reform the proxy voting system to shield the financial interests of retail investors by advocating transparency, accountability, and accuracy. Moreover, Republican lawmakers want to bolster accountability in shareholder voting by coalescing voting decisions with shareholders’ economic interests.

The preliminary report suggests enhancing oversight of large asset managers to make certain that their mechanisms support the retail investors’ investment objectives. It also recommends improving ESG ratings, something that many experts purport needs an overhaul.

But Republican officials also propose targeting regulators by strengthening conduct, oversight, and transparency through probes into federal regulatory initiatives and statutory limits from regulatory agencies. The report further recommends defending U.S. firms “from burdensome EU regulations” and “safeguarding American interests in global markets.”

“As Chairman of the ESG Working Group, I will work to push policies that benefit all Americans, not just those seeking to push their far-left agenda,” said Oversight and Investigations Subcommittee Chairman Huizenga (R-Mich.) in a statement. “Today’s preliminary report is clear about one thing, the Biden Administration is making it harder for Americans to retire. 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. House Republicans will stand up, defend the free market, and the ability for Americans to make their own financial decisions as they see fit.”

New Legislation

The Working Group’s interim report comes soon after Rep. Andy Barr (R-Ky.) introduced legislation on June 21 focusing on financial advisors and retirement funds considering ESG issues and ensuring they concentrate on maximizing profits. This measure would limit investments in ESG. Investors must offer written consent if they wish to have their money parked in ESGs.

This past spring, President Biden vetoed a bill that would roll back a White House rule permitting fiduciaries to integrate ESG factors into their investment decisions. It garnered the support of three Democrats: Sen. Joe Manchin (D-W. Va.), Sen. Jon Tester (D-Mon.), and Rep. Jared Golden (D-Maine).

Barr contends that these efforts try “to depoliticize investing in America.”

“Environmental, social, and governance investing has become a cancer and a fraud within our capital markets, steering retail investors, sometimes unwittingly, into lower-performing, less diversified, and higher-fee funds,” Barr told CNBC.

“Whether you are a Republican, a moderate or a Democrat, or conservative or liberal, we’re trying to depoliticize investing in America. Your 401(k), your 529, your investment account should work for you. It should deliver returns. It shouldn’t be a mandatory political statement,” he said.

The GOP War on ESG

Last summer, several Republican state leaders and officials fired the opening salvo in the war on ESG.

In July 2022, Texas Comptroller Glenn Hegar published a list of 348 investment funds and ten firms restricted from doing business with the state government over their boycotts of energy firms. This list was later updated in March.

Florida Gov. Ron DeSantis and the State Board of Administration trustees approved a resolution in August to end ESG considerations from state pension funds, arguing that the highest return on investment for taxpayers and retirees should be the main priority.

Oklahoma Gov. Kevin Stitt signed the Energy Discrimination Elimination Act of 2022, a piece of legislation to require the state to divest holdings in financial institutions that boycott the energy sector. Stitt accused ESG advocates of “attacking our way of life” and vowed not “to do business with people that don’t promote our assets.”

Earlier this year, 21 Republican attorneys general penned a letter to 53 of the largest U.S. fund firms, including BlackRock and JPMorgan Chase, raising fresh concerns surrounding their consideration for ESG factors.

“Despite the extensive duties that you owe to your clients under federal and state law, many of you have committed to take actions inconsistent with your clients’ financial interests,” they wrote in a March 30 letter (pdf).

ESG has emerged as a top subject for several candidates in the 2024 Republican primary race.

Presidential candidate and entrepreneur Vivek Ramaswamy has made opposition to “woke investing” integral to the core of his platform.

Former President Donald Trump labeled ESG as “radical-left garbage” and promised “to support a law to keep politics away from Americans’ retirement accounts forever.”

DeSantis noted in his presidential announcement that the ESG movement could never be accomplished through the ballot box.

“We will not be a free society if major financial institutions can do through the economy what people could not achieve through the ballot box,” he said.