United States: House GOP ESG Working Group; Interim Report Released

On Friday, 23 June 2023, the House GOP Environmental, Social, and Governance (ESG) Working Group, led by Chairman Bill Huizenga (R-MI) and several Republican members of the House Financial Services Committee (HFSC), issued its Preliminary Report on ESG Climate Related Financial Services Concerns. In the report, the ESG Working Group (Working Group) focuses primarily on the environmental aspect of ESG factors and examines the impacts of the Biden administration's proposed legislative and regulatory policies on capital markets and economic performance. The full text of the Working Group's interim report is available here.

The Working Group's interim report highlights the ambitious and far-reaching proposed regulatory agenda of the Biden administration and the Securities and Exchange Commission (SEC) in particular. Specifically, the report outlines key priorities that the Working Group will continue to focus on throughout the 118th Congress, including reforming the proxy voting system, promoting transparency and accountability in the proxy advisory system, enhancing accountability in shareholder voting, increasing transparency and oversight of large asset managers, improving ESG rating agency accountability and transparency, strengthening oversight of federal regulatory efforts related to ESG and climate policy via the financial system, promoting transparency and adherence to statutory limits from financial regulators, and protecting U.S. companies from influence of foreign climate regulatory efforts.

Republican Members of the Working Group and HFSC have introduced various pieces of ESG-related legislation which have served as the core proposals guiding this effort. Such legislation includes:

• The Ensuring Sound Guidance (ESG) Act (H.R. 4237), which was introduced by Rep. Andy Barr (R-KY) on 21 June 2023. According to his press release, this bill would "require investment advisers and ERISA retirement plan sponsors to prioritize financial returns over non-pecuniary factors when making investment decisions on behalf of their clients."
• The Mandatory Materiality Requirement Act (H.R. 4168/S.2005), which was introduced in the House by Rep. Bill Huizenga (R-MI) and in the Senate by Sen. Mike Rounds (R-SD) on 15 June 2023. According to their press release, these bills would "amend both the Securities Act of 1933 and the Securities Exchange Act of 1934 by inserting statutory language directly into both acts saying an 'issuer is only required to disclose information in response to disclosure obligation adopted by the Commission to the extent the issuer has determined that such information is important with respect to a voting or investment decision regarding such issuer.'"
• The Putting Investors First Act (H.R. 448), which was introduced by Rep. Bryan Steil (R-WI) in January 2023. According to the CRS summary, the "bill requires a proxy advisory firm to register with the Securities and Exchange Commission and prohibits an unregistered proxy advisory firm from using interstate commerce to provide proxy-voting advice, research, analysis, or recommendations to any client."
• The Protect Farmers from the SEC Act (H.R. 1018/S. 391), which was introduced in the House by Rep. Frank Lucas (R-OK) and in the Senate by Sen. John Boozman (R-AR) in February 2023. According to the CRS summary, the "bill prohibits the Securities and Exchange Commission from requiring the disclosure of greenhouse gas emissions related to agricultural products."

We expect the House Financial Services Committee and its various subcommittees to hold a series of hearings in the coming weeks to examine marketplace developments, including the Biden administration's focus on climate and social equity policies in greater depth. We also expect the Committee to hold a markup before Members' departure for the August district work period. Interested clients will need to move quickly in order to be involved in the conversations regarding these important developments.

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