Originally published June 7, 2023 9:00 am PDT
A joint hearing held today by the Subcommittee on Economic Growth, Energy Policy, and Regulatory Affairs, and Subcommittee on Health Care and Financial Services addressed the growing concern around Environmental, Social, and Governance (ESG) compliance.
The hearing, titled “ESG Part II: The Cascading Impacts of ESG Compliance,” focused on how these initiatives are affecting businesses, consumers, retirees, and the economy at large.
The hearing concluded that ESG measures are harming the ability of businesses to provide financial returns, leading to negative impacts on retirees and pensions.
“ESG manipulates markets as well as access to markets in order to advance a leftist political agenda,” warned Mandy Gunasekara, Director, Center for Energy & Conservation at the Independent Women’s Forum in her opening remarks.
She emphasized that the ESG initiatives are contributing to high-cost gas and electricity prices, which disproportionately affect low-income households.
Another key takeaway from the hearing was that ESG reporting requirements could place a burden on small businesses and consumers as they increase prices, limit growth, and potentially put companies out of business.
In turn, this could lead to job losses and reduced revenue.
Additionally, divestment from politically “disfavored industries,” such as fossil fuels, while improving a company’s ESG rating, doesn’t meet the country’s energy demands.
“That’s why I refer to the ESG agenda as the China ESG agenda. It does very little to help Americans. It does everything to help the Chinese Communist Party, and again, making energy expensive, scarce, and government controlled,” voiced the Honorable Jason Isaac, Director of Life: Powered at the Texas Public Policy Foundation, in his opening statement.
Asset managers such as BlackRock, Vanguard, and State Street came under fire during the hearing. Accusations were leveled at these firms for allegedly violating their fiduciary duty by prioritizing political agendas and ESG goals over profit.
Stephen Moore, Distinguished Fellow in Economics at the Heritage Foundation, stated in an opening statement, “When fiduciary companies are voting for these ESG resolutions, they are violating their fiduciary, because these are not in the interest of shareholders.”
Subcommittee Chairman Pat Fallon (R-TX) questioned the effect of ESG measures on the energy sector and American energy security.
He also inquired about the implications of investment fund managers potentially violating their fiduciary duty by pursuing political agendas. “When we suppress those energy resources, that demand doesn’t go away. It’s just transported overseas to places like China, India, or Russia,” Mandy Gunasekara responded to Fallon’s query.
Subcommittee Chairwoman Lisa McClain (R-MI) raised concerns about the burden ESG reporting requirements place on small businesses.
She inquired if ESG was a more efficient investing strategy, to which Stephen Moore responded, “The predominant number of studies show that ESG investing, just like any social investing technique, reduces return, because you’re limiting the number of companies you can invest in.”
These concerns were echoed by Rep. Jake LaTurner (R-KS), who emphasized the potential risk ESG initiatives pose to Americans’ retirement savings.
In response, Moore stated, “The preponderance of the studies show that ESG investing reduces investor return. Frankly, these firms do have a fiduciary duty to provide them the highest return possible.”
The hearing made it clear that there are serious concerns about the financial implications of ESG standards and their potential to harm businesses and investors.
Further discussions and potential regulatory scrutiny are expected as the debate around ESG compliance continues to unfold.