Friday, May 12, 2023

ESG culture war battles rage on in House Oversight Committee hearing

By Brad Rosen, J.D.

In setting the tone and tenor for a highly contentious House Oversight and Accountability Committee hearing on ESG practices, Chairman James Comer (R-KY) proclaimed in opening remarks “ESG is just window dressing for liberal activism and radical far-left ideology”.

In response, Ranking Member Jamie Raskin (D-MD) asserted, “Responsible Investing principles – including ESGs – have been freely chosen by America’s companies and employed by asset managers and pension fund managers for decades.” Raskin added, “Right-wing attacks on these principles—fueled by dark money, corporate special interests, and flawed legal arguments—threaten the savings and retirements of Americans by forcing asset managers to ignore material risks and considerations and violate their fiduciary duties.”

The three and a half hour hearing, titled ESG Part I: An Examination of Environmental, Social, and Governance Practices with Attorneys General, featured the testimony of two Republican state attorneys general, Sean Reyes from Utah and Steven Marshall from Alabama, both strident ESG opponents. Michael Frerichs, the Democratic state treasurer from Illinois, testified in favor of utilizing ESG principles in managing funds entrusted to his office.

ESG is part of a radical political agenda. In his opening statement, Chairman Comer claimed that asset managers and activist shareholders are partnering with liberal advocacy groups to push ESG priorities and a radical political agenda with Americans’ money. Moreover, Comer asserted that ESG commitments are often at odds with their clients’ best interests, occur without their clients’ knowledge, and are used to force businesses to comply with a far-left ideology.

The chairman further stated that asset managers control an estimated $126 trillion dollars, which constitutes almost 30 percent of all global financial assets, noting, “That’s a lot of money being manipulated to push a leftist ideology.” Comer also expressed his concerns about two proxy advisory firms he claims have been unduly influenced by ESG activists, and their broader control over 90 percent of the market. He characterized these arrangements as “a coordinated effort by unelected shadow organizations to force their policies on U.S. taxpayers, investors, and retirees.”

American businesses don’t buy climate denialism propaganda. In his remarks, Ranking Member Raskin spoke about responsible investment principles, of which ESG is one, and underscored the need to take into account all material considerations and risks. This means companies and investment professionals consider “the calamitous consequences of climate change—the devastating hurricanes, the dangerous droughts, the sea level rise and coastal erosion, the incessant stormwater flooding, the spread of disease, and other costly natural disasters produced by radical destabilization of the earth’s climate.”

According to Raskin, “honest American businesses don’t buy the propaganda of climate denialism. They have a duty of loyalty and care to their shareholders and they’re focused on the actual bottom line, and that always means facing reality, not swallowing myths.” He further stated, “America’s most successful investors and asset managers have systematically embraced responsible investment principles as a fulfillment of their fiduciary duty to minimize risk, maximize returns, and prudently plan for long-term challenges, like the ones associated with the destabilizing factor of climate change.”

An open conspiracy to bypass Congress. Utah Attorney General Sean Reyes, in his prepared remarks, asserted that ESG involves some of the biggest and most powerful players in the global economy attempting to force costly operational changes on American companies in pursuit of the 2015 Paris Agreement, the goal of which is to limit global warming to 1.5? C above pre-industrial temperatures.

Reyes underscored that the Paris accord had never been enacted into law and that “there has been an open conspiracy to bypass Congress and instead impose costly changes on American consumers.” He further claimed these changes drive up the cost of goods and harm shareholders by reducing returns. In sum, Reyes asserts that ESG is an undemocratic tax on our economy and productivity.

Alabama Attorney General Steven Marshall’s remarks echoed many of the sentiments of his Utah colleague. Similarly, he stated that “ESG is a clear and present danger to consumers and to our democracy. He also argued that an unelected cabal of global elites are using ESG, a woke economic strategy, to hijack our capitalist system, coerce corporations, and threaten the hard-earned dollars of working Americans.

ESG is about maximizing value. Illinois state treasurer Michael Frerichs called the attack on ESG investing principles “a widespread, highly coordinated, politically motivated attack on investors and the hard-working people they serve” in his prepared statement. He characterized that pushback as anti-free market and anti-investor, harmful to pensioners, working people, businesses, and America.

Frerichs further explained that ESG is data and simply additional information investment professionals use to assess risk and return prospects. He observed, “It is about value, not values. In order to maximize returns, an investor must be able to manage and mitigate risk.” The treasurer concluded, “The more data we as investors have, the better informed our decision is when selecting investments over the long-term.”

More to come. Chairman Comer further indicated this hearing will not be the end of the committee’s work on this topic. In his view, there is clearly a need to continue oversight of the Biden Administration’s government-wide efforts regarding ESG, and what he sees as unelected bureaucrats dictating to the American people what they are allowed to say, spend their money on, or do with their hard-earned savings.