Shareholder Advocacy: The Radicals on the Hill

Unfortunately, when the U.S. House of Representatives selected Mike Johnson, R-La., as its Speaker, they picked someone who has been vehemently opposed to socially responsible investing. In the past six years, he sponsored four bills (that didn’t pass) to curtail it, stating that the Department of Labor is overreaching its authority by allowing retirement plans to include funds that integrate environmental, social, and governance (ESG) data and processes.

Meanwhile, in early November, other Republican members of the House continued efforts to prevent government agencies from regulating disclosure of corporate behavior on ESG issues. The 2024 Financial Services and General Government appropriations bill drafts include amendments that would:

  1. Reduce the funding of the Securities and Exchange Commission (SEC).
  2. Prohibit the SEC from using its budget to enforce rules it has already passed on matters of shareholder rights and proxy voting.
  3. Prevent the Department of Labor from implementing the ESG fiduciary final rule passed last year that permits retirement plans to include ESG factors in the selection of investments.
  4. Prohibit federal agencies from using funds to implement President Biden’s executive orders pertaining to climate change, including the Office of Management and Budget’s assessment of the social cost of greenhouse gases on federal procurement, budgeting, and environmental review processes.
  5. Remove funding for the White House Office of Domestic Climate Policy and the Treasury Department’s proposed Climate Hub, an entity that develops and delivers science-based, region-specific information and technologies to agricultural and natural resource managers leveraging USDA investments and regional partner networks. This enables climate-informed decision making, reduces agricultural risk, and builds resilience to climate change.

The fact that these regulations are attached to appropriations bills when they don’t stand a chance of passing independently is of great concern. We are encouraging the Senate, and Democrats there in particular, to remove these provisions from government funding legislation and to address such regulatory issues separately on their own merits. President Biden has strongly indicated he would veto any budget legislation that includes these provisions.

THE HOUSE IS CONTINUING TO SPREAD MISINFORMATION ABOUT ESG INVESTING.

Also in November, the House Committee on Ways and Means held a four-hour hearing: “Ensuring that ‘Woke’ Doesn’t Leave America Broke: Protecting Seniors and Savers from ESG Activism.”

In addition, several firms with which Natural Investments has business and investment relationships—nonprofit shareholder advocate and proxy advisor As You Sow and Trillium Asset Management—have been subpoenaed by the House Judiciary Committee to provide information about their ESG practices.

The Committee is suggesting that attempts by investment managers and advisors to join membership organizations and coalitions like Climate Action 100+, Ceres, Interfaith Center for Corporate Responsibility—which advocate to minimize corporate fossil fuel emissions by advancing decarbonization and net zero emissions goals—are facilitating collusion in violation of U.S. antitrust law.

While the House doesn’t have legal authority to do anything other than gather information for the purpose of revising or establishing laws that govern industry, we remain concerned about Republican overreach in attempting to prevent advocates of responsible corporate behavior. We will continue to stand by our allies as they defend themselves against baseless attacks on their purpose.

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