Washington – The House Committee on Financial Services Subcommittee on Oversight and Investigations today held a hearing entitled “The Fall of ESG: Scrutinizing the Failed Use of Environmental, Social, & Governance Standards and the Influence of Proxy Advisors.” Organized by members of Congress who have taken hundreds of thousands of dollars in campaign contributions from the oil and gas industry, the Subcommittee called upon witnesses who have also funded their careers from Big Oil billionaires. The hearing is one step in a series of efforts from self-interested politicians leveraging their positions of power to attack responsible investing.
In response to the hearing, Unlocking America’s Future Spokesperson Kyle Herrig said the following:
“The comments made at this hearing were a transparent effort from self-serving politicians in the pockets of Big Oil to fear monger and push misinformation around responsible investing. Rep. Bill Huizenga touted fiduciary duty as an argument against ESG, despite the fact that investors have repeatedly made clear that accounting for climate risk is their fiduciary duty. The hearing also elevated attacks against shareholders advocating for ESG, but chose to omit the fact that anti-ESG shareholder activists are playing the same game. As Ranking Member Rep. Al Green noted, investors that ignore climate risk will face serious financial consequences.”
Highlights from the hearing include:
- Rep. Al Green (TX-09) pointed out the very real effects of climate change and the consequences of ignoring their material risk to the financial system, drawing attention to the “recent trend where some of the largest insurance companies are choosing to withdraw coverage from certain states.”
- Rep. Maxine Waters (CA-43) drew attention to the benefits of ESG’s non-environment elements, noting that they “help ensure fair wages, safe working conditions, equitable opportunities, helping to reduce inequality and build thriving local economies.”
- Rep. Sean Casten (Il-06) reinforced that attacks on responsible investing and climate risk disclosures keep investors in the dark about their clients’ financial security, and that supporting these disclosures is “supporting investor knowledge.”
- Tim Doyle, who previously worked at the Big Oil-backed Bipartisan Policy Center, even admitted that “banning ESG as an attempt to prevent its use for political or ideological purposes” is not the answer and “risks excluding other economically relevant data.”
- Illinois State Treasurer Michael Frerichs pointed to the impact of these attacks at the state level, noting that “study after study, and meta-studies, have shown that these anti-ESG legislation are costing states money.”
Lowlights from the hearing include:
- Chair Rep. Bill Huizenga (MI-04) opened the hearing arguing that “activists have hijacked the shareholder proposal process, becoming the de facto standard setters for corporate governance policies.” In fact, between January and May 2024, anti-ESG shareholder proposals attacking carbon reduction and corporate social responsibility policies increased by 900% compared to 2020. Mostly driven by the Exxon-backed National Center for Public Policy Research, all measures failed to pass a majority vote.
- National Association of Manufacturers Vice President of Domestic Policy Charles Crain alleged that proxy shareholder firms “ignore or even harm shareholder value creation,” despite the fact that research continues to show that sustainable funds have comparable, if not better, financial returns to traditional funds with less downside risk, with nearly 80% of impact investors reporting that their financial performance meets or exceeds their targets.
