House Republicans passed a tranche of legislation targeting ESG and “woke” financial and educational policies, a preview of actions the GOP could take next year if it takes control of both chambers and the presidency.
ESG, which is short for environmental, social, and governance, is a financial model that centers on compelling social change through investment and divestment. With ESG, investment managers seek not solely to maximize profits but incorporate other considerations into financial decisions, such as a company’s greenhouse gas emissions.
While ESG policies and ESG investing have been touted by some on the Left as an effective means to affect change on matters like climate change, Republicans have launched a full-fledged assault against it, branding such policies as “woke” and part of a culture war. They argue that companies and funds should be squarely focused on maximizing returns and not on pushing ESG or dabbling in social and environmental matters.
The Republican fight against ESG has been waged at both the state and national level. As part of a “woke week,” the House passed three measures this week.
The first bill, the Protecting Americans’ Investments from Woke Policies Act, is a response to a Biden administration rulemaking. The Labor Department rule in question allowed, though does not require, fiduciaries to weigh ESG factors when making investment decisions for U.S. retirement accounts
The legislation, which was sponsored by Rep. Rick Allen (R-GA), passed the House in a 217-206 vote, with three Democrats joining all Republicans in passing it. The Democrats voting in favor were among those thought to be most vulnerable in the coming election: Jared Golden of Maine, Marie Gluesenkamp Perez of Washington, and Mary Peltola of Alaska.
“There is no room for ESG when considering how to invest Americans’ lifesavings,” the conservative Americans for Tax Reform said in a letter ahead of the vote. “Retirement plan managers should only consider pecuniary factors when making investment decisions and voting proxies.”
In a statement of administration policy released ahead of the vote, the White House said that it opposed the legislation, which would “severely restrict the ability of fiduciaries of job-based retirement plans to make informed investments on behalf of plan participants and beneficiaries.”
The second piece of legislation, dubbed the End Woke Higher Education Act, targets colleges and universities, which have increasingly been under the spotlight following the Hamas attack on Israel and subsequent protests that have rocked campuses across the country.
The legislation, which was introduced by Rep. Burgess Owens, passed the House in a 213-201 vote, with four Democrats joining Republicans.
It amends the Higher Education Act of 1965 to require that colleges and universities to “put in place First Amendment principles” in order to receive federal funding. It also bars accreditors from requiring “partisan frameworks and ideological litmus tests” for schools in order to receive accreditation.
“What is happening on college campuses and in classrooms goes against the values America was built on,” House Majority Leader Steve Scalise’s (R-LA) office said in a news release. “House Republicans are fighting to ensure American students are able to freely express themselves and have the opportunity to allow their ideas to compete without repercussion.”
The White House opposes the legislation and said its adoption would “micromanage” colleges and universities, “undermining their ability to recognize and promote diversity.”
“Today marks a major victory for academic freedom in higher education and a decisive blow to politicized accreditors who have worked to make the adoption of woke DEI agendas a condition for federal funding eligibility,” Owens said.
The House also passed the Prioritizing Economic Growth Over Woke Policies Act, which was introduced by Rep. Bill Huizenga (R-MI). The bill passed in a 215-203 vote, with three Democrats voting with Republicans.
The legislation would limit corporate disclosures required by the Securities and Exchange Commission, as response to activists who have tried to require that companies provide disclosures related to climate and social goals. Conservatives have decried such efforts as social regulation via the financial system.
The bill also would prevent the SEC from forcing a publicly traded company to include a shareholder proposal or even the discussion of a proposal in a proxy statement.
“These misguided ESG efforts don’t benefit our banking system or capital markets,” Huizenga said Thursday on the House floor. “They certainly don’t help consumers, workers, job creators, everyday investors, or retirement savers.”
The White House also opposes this legislation. The administration said that its passage would “fundamentally limit the SEC’s ability to fulfill its mission” and “would disempower stakeholders and investors.”
Taken together, the anti-ESG and anti-woke legislation shows that Republicans are prioritizing such matters in the lead up to the November elections. GOP state officials have also been pushing back on ESG.
For instance, in a cease-and-desist order from this year, Mississippi Secretary of State Michael Watson accused money manager BlackRock — a frequent target of anti-ESG ire — of making “fraudulent statements, omissions, and other misrepresentations” about its environmental, social, and governance strategies.
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West Virginia Treasurer Riley Moore — who is now running for a seat in Congress — has banned several banks from state contracts over their ESG policies and “boycotts” of fossil fuel companies. Among them are BlackRock, Goldman Sachs, J.P. Morgan, Morgan Stanley, and Wells Fargo. Those banks have lost access to billions of dollars in annual inflows and outflows.
The grouping of “woke week” legislation comes after Republicans dubbed last week “China week.” The House passed several pieces of legislation to curb China’s growing influence and present a contrast with the Biden-Harris administration.