Hearing Wrap Up: Asset Managers Prioritize Damaging ESG Measures, Risking Americans’ Hard-Earned Money & Energy Security

WASHINGTON—Subcommittee on Economic Growth, Energy Policy, and Regulatory Affairs and Subcommittee on Health Care and Financial Services held a joint hearing titled “ESG Part II: The Cascading Impacts of ESG Compliance” to examine how environmental, social, and governance (ESG) initiatives impact businesses, consumers, and retirees. At the hearing, members examined how ESG measures are causing harm to retirees, pensions, and the economy by impacting the ability of businesses to make decisions that are in line with their duties to provide financial returns.

Key Takeaways:

Due to Democrats’ ESG push, the private sector is pursuing liberal policy goals at the risk of Americans’ hard-earned savings and retirement plans.

• “While branded as an investment strategy for good, ESG manipulates markets as well as access to markets in order to advance a leftist political agenda,” Mandy Gunasekara, Director, Center for Energy & Conservation at the Independent Women’s Forum, said in her opening remarks. “ESG is also a contributing factor to high-cost gas and expensive electricity prices that hit low-income households the most, forcing some to choose between food or electricity.”

ESG reporting requirements burden small businesses and consumers’ ability to afford products as they increase prices, limit growth, put companies out of businesses, result in lost jobs, and reduce revenue.

• Divestment from politically ‘disfavored industries’, such as fossil fuels, improves a company’s ESG rating, yet ESG-preferred energy source are not capable of meeting American 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,” the Honorable Jason Isaac, Director of Life:Powered at the Texas Public Policy Foundation, said in his opening statement.

Asset managers like Blackrock, Vanguard, and State Street are violating their fiduciary duty by pursuing political agendas and prioritizing ESG goals over profit. Members at the hearing discussed the need for greater corporate transparency.

• “When fiduciary companies are voting for these ESG resolutions, they are violating their fiduciary, because these are not in the interest of shareholders,” Stephen Moore, Distinguished Fellow in Economics at the Heritage Foundation, said in an opening statement.

Member Highlights:

Subcommittee Chairman Pat Fallon (R-Texas) asked about the effects of investment fund managers violating their fiduciary duty by pursuing political agendas at the risk of their clients’ retirements and pensions.

Rep. Fallon: “Do investors and money managers legally owe fiduciary duty to their clients under federal law?”

S. Moore: “If people want to invest their money in ESG funds, [Congresswoman McClain], I couldn’t have said it better than you did. It’s a free country. What I’m talking about in my testimony is companies like BlackRock and State Street voting on these resolutions without the knowledge of the clients and without their approval.”

Subcommittee Chairman Fallon also discussed how ESG measures reduce capital flow to the energy sector and risk American energy security.

Rep. Fallon:“Can we justify the green-at-all costs approach that permeates not just the federal government, but now our financial systems?”

M. Gunasekara: “When we suppress those energy resources, that demand doesn’t go away. It’s just transported overseas to places like China, India, or Russia, that do not ascribe to the same level of environmental standards that we do in this country, which ultimately undermines environmental progress that we’ve made over the past few decades.”

Rep. Fallon: “What should Congress be most worried about when we think about ESG and the future of American energy?”

The Honorable J. Isaac: “Energy independence is probably the most important thing. As we continue to see this demonization from financial institutions and politicians alike, these anti-American energy policies are crushing.”

Subcommittee Chairwoman Lisa McClain (R-Mich.) asked about how ESG reporting requirements place additional burdens on small businesses, limit growth, reduce tax revenue, and result in higher prices.

Rep. McClain: Is ESG a more efficient investing strategy?

S. Moore: “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.”

Moore added: “I can’t tell you how many people I’ve heard from since we did our study saying, look, this is my retirement. I’ve worked my whole life to buy a home in Florida or Arizona when I retire, and this is costing me thousands of dollars. People are upset about it, and they’re upset that they didn’t know about it.”

Rep. Jake LaTurner (R-Kan.) emphasized how prioritizing poor-performing ESG funds jeopardizes Americans’ retirement savings.

Rep. LaTurner: “Can you briefly elaborate upon the financial liabilities my constituents’ golden-year savings are exposed to under the Biden Administration’s ESG standards?”

S. Moore: “The preponderance of the studies show that ESG investing reduces investor return.” He added, “Frankly, these firms do have a fiduciary duty to provide them the highest return possible.”

Rep. LaTurner: “To your personal knowledge, are climate change activists using the threat of political action to pressure banks from lending to certain energy and industrial sectors, like the fossil fuel industry?”

S. Moore: “Here’s the point about this. The U.S. economy cannot operate without fossil fuels. So the idea that we’re going to eliminate fossil fuels over the next 20, 30, or 40 years is extraordinarily economically dangerous.”