Politicized finance — and the government’s role in it — is going to be a bigger issue than ever in 2023, and both institutional and individual retail investors could be in for some major surprises. Legislative proposals at the federal level will be taking aim at environmental, social, and governance (ESG) investing policies, in a backlash that has only accelerated since a year ago.
Advocates advertise ESG as simply a smarter, more holistic, and more sustainable way to invest, but more and more people on the right have caught on and are beginning to understand that in practice, ESG functions to smuggle progressive policy goals into ostensibly nonpolitical corporate decisions. Whether it calls for an end to fossil fuels, diversity-hiring mandates, support of abortion or boycotting Israel, you’d be hard-pressed to find an ESG goal that doesn’t fit neatly into a House Progressive Caucus policy memo. Because of that, several Republicans in Congress have recently made ESG a top issue, including members of the House Financial Services Committee, now chaired by Representative Patrick McHenry (R., N.C.).
Even in a divided Congress in which House Republicans can expect little cooperation from the Democrat-controlled Senate, having the Financial Services gavel switch hands from Maxine Waters (D., Calif.) to McHenry is a dramatic change. McHenry has already made clear that he will be calling Securities and Exchange Commission chairman Gary Gensler to testify on the agency’s ESG initiatives, in particular the jaw-droppingly expensive and invasive climate-disclosure rule that it is currently finalizing. Less discussed, but no less likely to be a source of interest to the committee, is the SEC’s planned “human-capital management” rule, which could mandate every public company in America to collect and disclose the demographic information (race, sex, ethnicity, sexual orientation, and gender identity) of every employee. A “self-regulatory” rule adopted by NASDAQ and approved by the SEC in 2021 already requires such disclosures in the context of boards of directors.
Read the full article on National Review.