Reps. Andy Barr (R-Ky.), Bryan Steil (R-Wis.), and Bill Huizenga (R-Mich.) are leading the charge to combat environmental, social, and governance (ESG) standards in Congress. Although the 117th Congress is coming to a close, these bills all warrant reintroduction in the 118th Congress. Members that believe that investing and proxy voting should be depoliticized should strongly consider supporting these bills and policy initiatives.
- Rep. Barr, a member of the House Committee on Financial Services, and the ranking member of the Subcommittee on National Security, International Development and Monetary Policy, introduced the Ensuring Sound Guidance Act (H.R. 7151) and a joint resolution of disapproval (H.J. Res. 103). The Ensuring Sound Guidance Act would require plan managers of 401(k)s and other private employer plans to invest based on pecuniary factors. Plan managers “may not subordinate the interests of the participants and beneficiaries in their retirement income or financial benefits under the plan.” The joint resolution of disapproval would rescind the Department of Labor’s final rule allowing retirement plan managers to consider non-pecuniary factors when administering retirees’ 401(k)s. Sen. Mike Braun (R-Ind.) introduced Senate versions to both the bill and the joint resolution (S. 4613 and S.J. Res. 68).
- Rep. Steil, a member of the House Committee on Financial Services, introduced the Putting Investors First Act (H.R. 9527). Institutional Shareholder Services (ISS) and Glass, Lewis & Co. provide proxy voting advice and analytics to institutional investors, such as asset management firms and pension fund boards. The two firms control “more than 90% of the proxy advisory market [and] have assumed outsize influence over corporate voting matters.” Proxy advisory firms assert significant influence over institutional investors when voting on shareholder resolutions that impact the broader managerial issues affecting a company. The status quo gives credence to political shareholder proposals that fail to offer true financial benefits to investors. Rep. Steil’s bill would, among other things, require proxy advisory firms to register with the SEC, mandate greater transparency on the fees ESG funds charge investors, and prohibit institutional investors from automatically voting identically with the recommendations posed by the proxy advisory firms (robovoting).
- Rep. Huizenga, a member of the House Committee on Financial Services and ranking member of the Subcommittee on Investor Protection, Entrepreneurship and Capital Markets, introduced the Mandatory Materiality Requirement Act of 2022 (H.R. 9408). Normally the SEC has relied on court precedent to determine the scope of “materiality.” If this bill is enacted, it will require the SEC to first consider whether “there is a substantial likelihood that a reasonable investor” would determine the disclosure information “to be important with respect to an investment decision.” This will prohibit the SEC from finalizing rules that require superfluous disclosures. Sen. Mike Rounds (R-S.D.) introduced the Senate version of this bill (S. 5005).