Republican-led FSC proposes ESG crackdown legislation 

1st August, 2023

The Republican-led US congressional Financial Services Committee (FSC) has proposed a series of bills that are designed to limit the impact of ESG initiatives.

The committee, chaired by Republican Patrick McHenry, proposed the bills following series of hearings across its July ‘ESG month’.

It has proposed four new bills that, if they receive assent, would become: the Guiding Uniform and Responsible Disclosure Requirements and Information Limits (GUARDRAIL) Act, the Protecting Americans’ Retirement Savings from Politics Act, the Businesses Over Activists Act and the American Financial Institution Regulator Sovereignty and Transparency (American FIRST) Act.

The GUARDRAIL Act is aimed at bringing changes to the SEC disclosures rules, ensuring companies are only required to disclose information that is deemed material and requiring the SEC to publicly list and explain any non-material disclosure demands.

The Protecting Americans’ Retirement Savings from Politics Act would introduce rules around shareholders addressing ESG issues through the shareholder proposal and proxy voting processes. It raises resubmission thresholds for shareholder proposals, invalidates some SEC regulations and guidance, limits the SEC’s ability to define a “major policy issue,” and allows companies to exclude ESG proposals.

The proposed Businesses Over Activists Act states that the SEC does not have the power to regulate shareholder proposals and prevents the SEC from requiring companies to include or discuss shareholder proposals.

The America FIRST Act would introduce rules for federal banking regulators and their interactions with international organizations. It includes a series of requirements limiting how regulators can meet with organizations including the Basel Committee on Banking Supervision on the topic of climate-related risk.

Subcommittee Chairman Bill Huizenga said: “Across the nation, boardrooms are being held hostage by those who push policies that will lower returns for Americans trying to build a brighter and more financially secure future. House Republicans will stand up, defend the free market, and the ability for Americans to make their own financial decisions as they see fit.”

Congresswoman Maxine Waters, the top Democrat on the House FSC, at a full committee markup considering the bills, described them as “anti-ESG, anti-investor, and wholly anti-capitalist bills” that were “being forced by the extreme MAGA wing of the Republican party”.