Four months ago, House Financial Services Chair Patrick McHenry (R-N.C.) drafted Rep. Bill Huizenga (R-Mich.) to lead the GOP’s attack on ESG. Now, Huizenga’s working group and the committee are ready to spring into action. With Rep. Andy Barr (R-Ky.) declaring July “ESG month,” House Republicans are laying their plans for cracking down on Wall Street practices that further environmental, social and governance goals. ESG-centric investing, banking and other practices prioritize ideology over profits, they say, to the detriment of consumers and markets. We spoke with Huizenga to get a download on the pivotal weeks ahead — and how they fit into the party’s longer-term push. This interview has been edited for length and clarity. You said earlier this month that your ESG working group was getting ready to release a report containing recommendations. How's that shaping up? This is a preliminary report. This was our first crack at it. We feel good that we've been able to summarize … all of these disparate branches of activity and thoughts and actions that were going on — both from the regulators, from the industry, some of the legislative proposals — and to kind of corral those and put them all together, get them organized. That was really the purpose. Some of this, too, is we've got a group of people in the working group and on our committee that haven't been here for a long time working on these kinds of issues. [So] there's also some education that we need to do. We don't have any specific bill numbers laid out, for example, but we do have concepts and there are some bills that support those concepts. But we didn't want to get that prescriptive. [The report] has probably more of an emphasis on the E part of ESG, but there certainly are other elements that are talked about. What specific recommendations will the report include? [There’s] an acknowledgment that the proxy voting system is broken and needs to be modernized, right? So we highlight, for example, that ESG shareholder proposals [account] for 61 percent of all proposals, included on proxy ballots — that's twice what it had been the year prior. Proxy advisory firms are part of the problem. … They seem to prioritize social and political objectives versus economic impact to other shareholders. They've been part of the activist ecosystem. Investment advisers, asset managers, pension funds — I would argue some not all, but certainly some — have been ignoring their fiduciary duty to shareholders or maybe de-emphasizing that. There's currently no requirement for asset managers to justify why they are voting for some of these things and especially if they're voting against an independent board. There's very little transparency with that. The SEC has not done its job, in my humble opinion, on encouraging capital formation. This is one of [the] three pillars of what they are supposed to be working on. They've done all kinds of work on investor protection. … But they are also there to help encourage and build out these capital markets and encourage capital formation, and they've done the exact opposite. And then you've got the EU and some of the other international concerns about what's going on. It sounds like every House Financial Services Committee subcommittee will have a hearing on this. What is the Oversight and Investigations subcommittee hearing going to focus on? It’s climate disclosure — that's a huge part of the SEC’s rulemaking and what they've been going at. McHenry very deliberately wanted to put that issue into the O&I [subcommittee. But] we're not quite ready to release what bills we're going to be putting in for that hearing.
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