Tuesday, February 06, 2024

65 lawmakers call anti-ESG bill riders “antithetical to the free market”

By Lene Powell, J.D.

A group of U.S. lawmakers pressed Congressional decisionmakers to eliminate legislative riders that would block federal funds in broad ways relating to environmental, social, and governance (ESG) issues. In a letter to House and Senate appropriations leadership, lawmakers said the riders would restrict investors’ access to information and interfere with government and private investment decisions.

The riders are attached to different appropriations bills and would work in different ways.

For example, one rider would block a proposed SEC rule requiring disclosure of climate-related risks and greenhouse gas emissions. Another would prohibit a Department of Labor rule allowing private retirement funds to consider financially material ESG data.

The lawmakers challenged the riders as interfering with the free market.

“These appropriations riders follow a dangerous trend of political interference with investing choices at the state level that are antithetical to the free-market system that has made US markets the envy of the world,” the lawmakers wrote.

The letter was signed by 11 senators including Sen. Sheldon Whitehouse (D-RI) and 54 representatives including Reps. Sean Casten (D-Ill), Juan Vargas (D-Cal). The letter was sent to appropriations committee Chairs Patty Murray and Kay Granger and Ranking Members Susan Collins and Rosa DeLauro.

Anti-ESG riders. The lawmakers objected to five riders in appropriations bills that would restrict federal activities in varying ways relating to ESG.

The riders are included in four appropriations bills: Labor, Health and Human Services and Education; Financial Services and General Government; Defense; and Commerce, Justice, and Science.
  1. SEC climate disclosure rule—A rider in H.R. 4664 would prohibit the use of funds to finalize or enforce the SEC’s proposed climate disclosure rule, ““The Enhancement and Standardization of Climate-Related Disclosures for Investors.” (Sec. 550)
  2. Thrift Savings Plan—Another rider in H.R. 4664 would block the Thrift Savings Plan from investing in mutual funds that consider ESG criteria. The Thrift Savings Plan is a retirement savings and investment plan for federal employees and uniformed service members similar to a 401(k) in the private sector. (Sec. 754)
  3. DOL retirement rule—A rider in H.R. 5894 would block implementation of the U.S. Department of Labor’s rule which allows private retirement plans to consider financially material ESG data. The lawmakers said this rider has been the subject of failed Congressional Review Act attempts. (Sec. 118)
  4. Defense contractor climate emissions—A rider in defense appropriations bill H.R. 4365 would block funding for a rule to require federal defense contractors to disclose their greenhouse gas emissions and climate-related financial risks and set science-based targets to reduce their emissions. (Sec. 8146)
  5. ESG governance—A rider in H.R. 5893 would prohibit funding “to promote or contribute to environmental, social, and corporate governance.” Sec. 564)
Hot-button political issue. The legislators characterized the provisions as “controversial partisan policy riders” and “a dangerous trend of political interference” at the state level by groups like the American Legislative Exchange Council (ALEC). Those actions are costing those states’ residents billions of dollars, jeopardizing Americans' hard-earned retirement savings by unduly restricting mainstream investment options, the lawmakers said.

“To protect the annual appropriations process from extremist culture wars that cost our constituents their hard-earned savings and safeguard our free markets, we urge you to finalize FY 2024 appropriations bills without these dangerous political riders,” the lawmakers wrote.