A key House Republican is seeking answers from the Federal Reserve on how environmental, social and governance policies are impacting asset manager decisions.
Pledges on ESG issues, like climate, could bring about outsized influence that would then make the managers subject to the Bank Holding Company Act, the Home Owners Loan Act and the Change in Bank Control, Rep. James Comer, R-Ky., chair of the House Committee on Oversight and Accountability, said in a Feb. 26 letter to Mark E. Van Der Weide, the Fed's general counsel.
Comer raised concerns over endeavors like the Net Zero Asset Managers Initiative and Climate Action 100+.
"Pledges to act in concert with other signatories, actively pursue outcomes and use all assets under management to achieve the stated goals of the various agreements, appear to directly violate the terms laid out in your 2019 and 2020 letters," he said.
Comer referenced "determination letters" related to ESG policies that Van Der Weide issued in 2019 and 2020, respectively.
In those letters, the Fed said an asset manager may purchase as much as 25% of any class of voting securities of a bank without being deemed to have control of the company under the BHC Act or HOLA. Holding a controlling stake could trigger a range of complicated and costly compliance requirements.
"It is critical we understand whether asset managers are abiding by the conditions the Federal Reserve has set for them and whether the Federal Reserve and other federal banking regulators are monitoring the asset management industry's activities," Comer said.
He asked Van Der Weide to respond by March 11 to a series of 12 questions, including does the Fed staff "rely on self-certification by the companies to determine if the passivity requirements stipulated in your determination letter are being met?" And does the Fed "have an ongoing monitoring process to verify if the companies meet the passivity requirements of the determination letter?"
On the same day Comer's letter was sent, Climate Action 100+ warned that the right was winning the war on ESG.
