At Second ESG Hearing, Democrats Once Again Defend Responsible Investing and Retirement Savings of Americans
Washington, D.C. (June 7, 2023)—Rep. Cori Bush, Ranking Member of the Subcommittee on Economic Growth, Energy Policy, and Regulatory Affairs, and Rep. Katie Porter, Ranking Member of the Subcommittee on Health Care and Financial Services, led Subcommittee Democrats in defending responsible investing and the security of working Americans’ retirement savings.
“The MAGA insurrectionist Republicans’ political crusade against responsible investing is an attempt to manufacture a culture war and protect corporate special interests—all at the expense of taxpayers and their savings,” said Ranking Member Bush in her opening statement.
“Republicans apparently don’t want investors to know if a hugely profitable company outsources to China, if they have a huge carbon footprint and are unprepared for climate change, or they treat their workers horribly. It’s a lot more comfortable for them to just cover up all that information so they can get what they really want—big corporate profits at all costs,” said Ranking Member Porter in her opening statement.
The hearing included testimony from Mandy Gunasekara, Director, Center for Energy & Conservation, Independent Women’s Forum; Jason Isaac, Director, Life: Powered, Texas Public Policy Foundation; and Stephen Moore, Distinguished Fellow in Economics, Heritage Foundation. The hearing also featured testimony from minority witness Dr. Shivaram Rajgopal, Professor of Accounting and Auditing, Columbia Business School.
Subcommittee Democrats underscored the importance of access to environmental, social, and governance (ESG) data in planning for long-term challenges and making prudent investment decisions.
- Ranking Member Bush asked Dr. Rajgopal about the importance of ESG metrics being publicly available, to which he replied: “The current reporting disclosure model is woefully inadequate. … The idea is that these ESG metrics are related to future cash flows, not necessarily current ones. Think of these as leading indicators of what is to come in the future.”
- In response to a question from Congresswoman Eleanor Holmes Norton on the benefit ESG data provides to investors, Dr. Rajgopal responded: “If you were to just go by what an income statement or a balance sheet or the footnotes of a financial statement tell you, you would perhaps not have a full appreciation for all the risk factors related to the future sales, futures costs, and future earnings of a company. So that’s what ESG gives you.”
- While questioning Dr. Rajgopal, Rep. Summer Lee highlighted the practical impacts of having transparent investing information, as well as the cost of engaging in anti-ESG politics. Rep. Summer Lee stated that anti-ESG policies are, “harmful to Americans’ health, their quality of life, and retirement fund. Our future is at stake and instead of holding a hearing on that actual [climate] crisis…the anti-ESG policies do nothing more than force blinders on investors and prevent them from considering legitimate risk factors.”
Subcommittee Democrats demonstrated their commitment to protecting transparency, economic freedom, and the ability of fiduciaries to invest responsibly on behalf of their beneficiaries.
- Ranking Member Porter underscored the hypocrisy of Republican statements attacking responsible investing: “I think companies should be free to decide for themselves whether ESG practices are beneficial to their bottom line and business model and help them attract customers, or don’t. I, too, think that asset managers should be free to decide that ESG data helps them make good valuation decisions and good investment decisions. And if they don’t, they should be able to ignore it. I honestly, I can’t believe this is Part II, when Part I was actually the stupidest hearing I’ve ever been to. And now we’re having a Part II.”
- Ranking Member Jamie Raskin called out the lack of Republican Member attendance, saying: “I am with my colleagues who are just baffled that we are having not one, but two hearings. And I hope we are not going to have a third hearing, because then we will have no Republicans at all. Because I think they have absolutely abandoned the field because they are going against market freedom, consumer sovereignty, environmentally conscious, and socially conscious decision making that people want and where the market is taking us. That’s where we are right now.”
- After explaining how ESG factors materially affect a firm’s future cash flows and cost of capital, Dr. Rajgopal pointed out, “If there are signals that inform your view of future cash flows and risks, as a fiduciary, you would actually fail in your responsibility if you didn’t look at those signals.”
Subcommittee Democrats criticized Republicans for manufacturing a culture war, interfering in free market trends, and protecting corporate special interests.
- Rep. Melanie Stansbury illustrated that this hearing was more about the Republicans’ culture war than actual economic freedom: “This is yet another crusade in the culture wars against American freedom, but you know, quite strangely, against the market itself. And what I find particularly strange about this conversation is that over 63% of American voters actually oppose—directly oppose—any kind of government interference in investing strategies, and the vast majority of Republicans oppose it as well.”
- Rep. Shontel Brown exposed the Republicans’ attack on responsible investing as an attack on the free market: “Unfortunately, my Republican colleagues throw out their support of free market principles when it doesn’t fit their narrative. Apparently, recent abortion and book bans have not satisfied Republicans, so now they are interfering in the private market. It is truly disheartening to see my colleagues do everything they can to drag even the most commonplace issues into their manufactured culture wars. So let me close by saying this: Transparency, information access, facts, and truth are not conspiracies or a political agenda.”
- Rep. Becca Balint denounced the political efforts to transform the issue into an opportunity to attack transgender children: “It feels like every single hearing that I am in, whether it is in Oversight or whether it is Budget or whether it is in a subcommittee, somehow, the witnesses find a way to bring in trans children into whatever conversation we’re trying to have. And all I will say before I finish is, if you are a parent or you know parents that you love, I want you to think really carefully about whether you think those parents are making decisions for their children that are not in their children’s best interests. That’s what we’re talking about here. I don’t think it has any place in this hearing on investments to once again be beating up on Americans and their children.”