US Republicans on the offensive against ESG investing and reporting


US Republicans have unveiled a slew of proposed legislation aimed at curbing the influence of ESG initiatives on financial and capital markets.

The proposed bills include measures to thwart efforts to implement ESG and climate-related disclosure requirements on companies, and diminish investors’ ability to engage with businesses on sustainability issues. This is the latest move in a series of anti-ESG actions by the Republicans, who perceive these initiatives as a threat to the American financial system.

The proposed bills would require companies to report only on issues they deem material, permit them to exclude ESG-related shareholder proposals from proxy materials, and limit the ability of regulators to collaborate on climate-related financial risk. They also aim to target the SEC’s upcoming climate-related disclosure rules and hinder investors’ use of the proxy voting process to promote their “ideological preferences”.

The new proposed laws include the Guiding Uniform and Responsible Disclosure Requirements and Information Limits (GUARDRAIL) Act, spearheaded by Congressman Bill Huizenga. This bill aims to limit the SEC’s authority to require disclosures, allowing only those considered material by the issuer to be necessary.

The Act also calls for the SEC to assess the impact and legal basis of recent European rules requiring large U.S. companies to provide sustainability-related disclosures.

Another bill, the Protecting Americans’ Retirement Savings from Politics Act, proposes making it more difficult for investors to address ESG issues via the shareholder proposal and proxy voting process. This bill also introduces rules for proxy advisory firms and requires asset managers to have written consent from investors to consider “non-pecuniary” factors in their decision making.

House Financial Services Committee said, “These measures represent the first step in Republican efforts to combat the ESG movement by restricting politically motivated, non-material disclosure mandates, reforming the proxy voting and shareholder proposal processes, increasing transparency for federal banking regulators, and limiting the Securities and Exchange Commission’s (SEC) authority to regulate shareholder proposals.”

Congressman Bill Huizenga, sponsor of the GUARDRAIL Act, said, “Since taking over at the SEC, Chair Gensler has seemingly done everything in this power to dismantle our capital markets. Americans saving for retirement need less immaterial disclosure regulations that ultimately drive-up costs and reduce returns for everyday investors. The GUARDRAIL Act takes positive and deliberate steps to refocus the SEC on its core mission instead of pushing a political and social agenda.”

Businesses Over Activists Act sponsor Congressman Ralph Norman said, “ESG is an evil pollutant that must be eradicated from corporations and businesses. Ultimately, the Businesses Over Activists Act would preserve the first amendment rights of corporations and impede economic damages stemming from the misuse of resources delegated to the management of these politized proposals. The SEC should not and does not have the authority to compel companies to include ESG proposals.”

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