Republicans in the U.S. Congress have launched a new ESG Working Group, aimed at coordinating the party’s approach to ESG proposals, and signaling particular focus on the upcoming climate disclosure rules anticipated by the Securities and Exchange Commission (SEC) this spring.
In a statement announcing the formation of the working group, Patrick McHenry, Chairman of the House Financial Services Committee, said that the group aimed to “to combat the threat to our capital markets posed by those on the far-left pushing environmental, social, and governance (ESG) proposals.”
“Progressives are trying to do with American businesses what they already did to our public education system—using our institutions to force their far-left ideology on the American people. Their latest tool in these efforts is environmental, social, and governance proposals.”
The working group will be led by Bill Huizenga, who was appointed last month to chair the Oversight & Investigations Subcommittee on the House Financial Services Committee.
Among the key focus areas of the working group, according to the statement, will be to “rein in the SEC’s regulatory overreach.” The SEC is expected in April to release the final version of its climate disclosure rules for public companies. According to the SEC’s initial proposal released last year, the rules would for the first time require U.S. companies to provide information on climate risks facing their businesses, and plans to address those risks, along with metrics detailing the companies’ climate footprint including Scope 1, 2 and in some cases Scope 3 greenhouse gas (GHG) emissions.
Huizenga specifically referred to the SEC’s climate disclosure rule as a “prime example of overreach,” and cited the Supreme Court’s decision last year ruling that the Environmental Protection Agency (EPA) did not have the authority to regulate limits to carbon emissions from coal plants. In that case, the court that the federal agency had not been granted authority by Congress to implement regulations with such “economic and political significance.”
Additional focus areas for the group include reinforcing “the materiality standard as a pillar of our disclosure regime,” and holding to account “market participants who misuse the proxy process or their outsized influence to impose ideological preferences in ways that circumvent democratic lawmaking.” These focus areas would appear to align with recent political efforts to halt the implementation of a new Department of Labor (DOL) rule that would allow for the consideration of climate and ESG factors in private employer-sponsored retirement plans (ERISA), and to target large investors over their support for energy transition-focused proposals at fossil fuel companies.
According to the statement, the working group will coordinate Republicans’ response to ESG, including policy development and member education.
“I look forward to leading our committee’s ESG working group, which will focus on promoting strong, vibrant capital markets, while defending the interests of all retail investors.”