House Republicans pass anti-ESG package during 'anti-woke' week

The House last week passed a package of bills aimed at curbing the use of environmental, social and governance factors in retirement investment decisions and limiting Securities and Exchange Commission climate-related disclosure rules.

The bills were part of what the GOP dubbed an "anti-woke week" on the Hill. The legislation has little chance of advancing in the Democrat-led Senate, but offers a glimpse of how Republicans would tackle the issue if they gain power in the November elections. SEC Chair Gary Gensler is set to appear before House and Senate committee this week.

Bloomberg News

The Republican battle against ESG in Congress, which has featured hearings, reports and bills, echoes a larger one in state legislatures, where the public finance market has gotten caught up in Republican laws ranging from banning underwriters to the use of so-called green bonds and ESG factors in investment decisions. The laws have come under scrutiny from critics who contend they carry adverse financial and economic impacts.

The Republican state laws have led to "billions of dollars of value lost for fiduciaries," said Rep. Sean Casten, D-Ill., who held a press call Friday with Rep. Juan Vargas, D-Calif., hosted by Unlocking America's Future, on the House bills. "If states are the laboratories for democracy, we're learning exactly the wrong lessons from these bills," Casten said.

"The good news is, these bills are going nowhere," Vargas said. "The Senate is not going to act on them and certainly the president, after he stops laughing, would veto them," he said. "The sad part is these are moments when we should be working together to try to figure out how to make investing sustainable for the long term."

H.R. 5339, the Protecting Americans' Investments from Woke Policies Act, aims to overturn a Biden administration Department of Labor rule that allows retirement plan managers to consider ESG factors in investment decisions. The bill would restore the rule back to one passed under former President Donald Trump, requiring investment managers of employer-sponsored retirement funds to make investment decisions solely "based on pecuniary factors." An earlier version of the measure passed under the Congressional Review Act was the target of Biden's first veto.

Biden said in a statement last week that the latest legislation would "reduce savings and retirement security for Americans" by "artificially limiting fiduciaries' ability to consider material information in making sound investments."

H.R. 4790, the Prioritizing Economic Growth Over Woke Policies Act, introduced by Rep. Bill Huizenga, R-Mich., would overturn the SEC rule that requires large public companies to report climate risks and emissions information. It would also give companies more power to block ESG-related proposals from shareholders.

"This week's legislation is a culmination of almost two years of work by House Republicans," said Huizenga in a statement. The bill "corrects the misguided social policies that have been weaponized by rogue regulators and liberal activist investors at the expense of financial returns."

Casten and Vargas were among the Democrats who tried to insert an amendment into H.R. 4790 that noted that the SEC has authority to require disclosures from private companies. The Republicans rejected the amendment as out of order. The point of the amendment, Vargas said, "was to show how crazy this thing is; that in fact that's why the SEC is there, to be the cop on the beat and make sure there are disclosures for people to get the information on what they want to know."

The End Woke Higher Education Act, H.R. 3724, would require colleges and universities to put into place First Amendment "principles" in order to receive federal funds, among other provisions.

In his statement, Biden criticized all three bills, and said the SEC bill would "severely limit the ability of federal financial regulators to protect consumers and investors."