WASHINGTON – Today, the House Committee on Oversight and Accountability held a hearing titled “ESG Part I: An Examination of Environmental, Social, and Governance Practices with Attorneys General.” At the hearing, members examined the concerns of state attorneys general (AGs) related to the integration of environmental, social, and governance (ESG) factors by asset managers. ESG priorities are being used by activist shareholders to push a radical, far-left ideology to shape the behavior of American businesses. Members highlighted how ESG commitments are often at odds with their clients’ best interests and even occur without their knowledge. Members also noted that the Biden Administration is routinely pushing ESG priorities over the economic, energy, and national security needs of the United States. Members stressed that the Committee would continue to expose and investigate harmful ESG practices and hold unelected bureaucrats accountable for pushing their own radical, liberal interests.
Key Takeaways:
Asset managers may violate their fiduciary duties to their clients by signing ESG pledges.
- State and federal law mandates asset managers must act in their clients’ best interest, but asset managers have signed pledges that prioritize ESG metrics above their clients’ returns, often without their clients’ knowledge.
- Utah Attorney General Sean Reyes stated: “Since the signing of the Paris Agreement in 2015, however, there has been an open conspiracy to bypass Congress and instead impose costly changes on American consumers using the power of horizontal agreements by key players in our financial system … These horizontal organizations comprised of asset managers, banks, and insurance companies seek to use their collective market power over trillions in assets to force costly changes in what they term ‘the real economy.’ The ‘real economy’ corporations that are the targets of these coordinated pressure campaigns would not adopt these changes on their own. These changes drive up the cost of goods. And they harm shareholders by reducing returns. In sum, ESG is an undemocratic tax on our economy and productivity.
The ESG agenda is jeopardizing Americans’ hard-earned money and the economic, energy, and national security interests of the United States.
- Alabama Attorney General Steve Marshall stated: “ESG is a clear and present danger to consumers and to our democracy. An unelected cabal of global elites is using ESG to hijack our capitalist system, capture corporations, and threaten hard-earned dollars of American workers. Since President Trump’s election, the global elites have formed at least 10 alliances dedicated to implementing radical ESG plans. These alliances threaten consumers by limiting output, raising prices, risking retirement funds, and creating anti-competitive conduct.”
The Oversight Committee will continue to expose and investigate harmful ESG practices and hold unelected bureaucrats accountable for pushing their interests on the American people.
Member Highlights:
Committee Chairman James Comer (R-Ky.) outlined how ESG practices are a coordinated effort by unelected shadow organizations to force liberal policies on U.S. taxpayers, investors, and retirees. He also noted that the Biden Administration’s endorsem*nt of ESG initiatives risks Americans’ retirement funds and is an effort to advance a political agenda.
Chairman Comer: “Even beyond the assets controlled by asset managers, ESG activists have infiltrated the broader market… This is a coordinated effort by unelected shadow organizations to force their policies on U.S. taxpayers, investors, and retirees.
And instead of providing Americans with the financial protections they’re due, regulators under the Biden Administration are actively encouraging this political takeover of the American financial system. No administration should be able to gamble with Americans’ retirements to fund its own political agenda in the private market. We must expose and investigate the propriety and legality of this coordinated effort.”
In addition, Chairman Comer pointed out that ESG is a far-left political movement that is gaining momentum, increasing liability costs, and hurting Americans financially.
Chairman Comer: “We’ve got a problem. ESG is a political movement that is impacting consumers and not just investors.”
Rep. Kelly Armstrong (R-N.D.) expressed his concern that ESG priorities have jeopardized Americans’ financial security and noted that asset managers need to act in the best interests of their clients.
Rep. Armstrong: “A lot of the testimony today brings up many of the problems with ESG in the world of finance. Americans rely on a sophisticated financial system to plan for their future. Yet the complexity of this system allows ESG causes to take precedent over the bottom dollar. The purpose of our investments is to grow our financial security and not shrink it. You have pointed out that ESG funds do not bring higher returns… Congress can ensure that economic interests legally take precedent.”
ep. Russell Fry (R-S.C.) highlighted that state AGs have sounded the alarm that asset managers are pushing ESG funds and not prioritizing their clients’ investments properly.
Rep. Fry: “This is not a new concept. Why are asset managers now struggling with their duties? When someone invests their money, they have the intention this money will grow, and they will get a return on that investment. However, these asset managers are throwing money at ESG initiatives that are contrary to those that have the investment holdings. Will asset managers be forced to choose between their legal duties to achieve financial returns and ESG policy goals?”
Attorney General Marshall: “Clearly there is a conflict. The role of asset managers is to maximize a return on investment, particularly for Americans who have invested their retirement dollars. Their concern is what is going to be there when I am done. ESG criteria is subjective.”
Rep. Gary Palmer (R-Ala.) emphasized that ESG-driven priorities are a direct threat to the U.S. economy, the domestic food supply, national security, and a benefit to the Chinese Communist Party.
Rep. Palmer: “What we are seeing with ESG-driven investments is not only a threat to our economy, but also a threat to our food supply. It is also a huge help to China… this empowers China, would you agree with that?”
Attorney General Marshall: “I do agree with that. This is driven by global elites who believe there should be a global energy policy. Not Congress acting, but those outside of our country dictating what our policy should be. This benefits China and gives them an unfair competitive advantage over American companies.”
Rep. Pat Fallon (R-Texas) highlighted the Biden Administration’s push to advance an ESG agenda and exposed how ESG is now placing Americans’ investments at risk.
Rep. Fallon: “The new rule of the Biden Labor Department to allow ESG to be taken into account and prioritized over fiduciary duty not only violates current law but also common sense …
“Under federal and state law, asset managers owe a fiduciary duty to their clients. Essentially, this means they are to put their clients’ interest first. When asset managers enter into ESG pledges or commitments, they violate their fiduciary duty and place undue risk on their clients’ investments.”
Rep. Fallon then asked Alabama Attorney General Marshall if the federal government should be able to gamble with the pensions of American workers.
Attorney General Marshall: “No … Clearly this Administration has gone too far.”
Rep. Lisa McClain (R-Mich.) pointed out that ESG practices are being weaponized by the radical left and stressed the importance of transparency.
Rep. McClain: “In my opinion, ESG is the politization of investing and continues to be weaponized by the radical left… Are asset managers required to tell their clients when they enter ESG pledges?”
Attorney General Marshall: “No.”
Rep. McClain: “Why the lack of transparency? … This is clearly a lack of transparency. At the end of the day, rate of return needs to matter. We also need to be transparent with the American people. Let’s just be transparent. If we can’t be transparent with our ideological views, then what are we hiding?”
READ MORE: ESG is Just Window Dressing for Liberal Activism and Far-left Ideology
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