"ESG is a clear and present danger to consumers and to our democracy," said Alabama Attorney General Steven T. Marshall, a Republican, who testified before the committee. "An unelected cabal of global elites is using ESG to hijack our capitalist system, capture corporations and threaten the hard-earned dollars of American workers."
But Illinois Treasurer Michael Frerichs, a Democrat whose office manages an approximately $52 billion investment portfolio, sees things differently.
"We are witnessing a widespread, highly coordinated, politically motivated attack on investors and the hard-working people they serve," Mr. Frerichs testified. "This pushback is anti-free market and anti-investor, and it is misleading and harmful. It harms retirement savers, pensioners, working people, businesses, and it harms America."
He said ESG is about looking at a wider range of risks and value opportunities that can have a material financial impact on investment performance.
"Frankly, I'm deeply concerned by the highly orchestrated attacks on the investment profession and the focus on restricting investors' freedom to exercise their professional discretion and fiduciary duty," Mr. Frerichs added. "To ask investment professionals to ignore material risks and investment opportunities is asking us to stop doing our jobs."
The third witness who testified Wednesday, Utah Attorney General Sean D. Reyes, a Republican, asked the committee to investigate the role of asset-manager impacts on utility companies; the role of proxy advisory firms in making shareholder recommendations; and the Department of Labor's new rule permitting retirement plan fiduciaries to consider ESG factors when selecting investments and exercising shareholder rights.
Mr. Reyes is leading a group of 26 Republican attorneys in challenging the Labor Department rule in U.S. District Court in Amarillo, Texas, arguing that it undermines key protections for retirement savers, oversteps the department's authority under the Employee Retirement Income Security Act and is arbitrary and capricious.
The rule, which took effect Jan. 30, maintains the department's position that fiduciaries may not sacrifice investment returns or assume greater investment risks as a means of promoting collateral social policy goals.
Rep. Jamie Raskin, D-Md., the committee's ranking members, said attacks on ESG investing are unwarranted.
"America's most successful investors and asset managers have voluntarily and freely embraced responsible investment principles as a fulfillment of their legal fiduciary duty to minimize risk, maximize returns and prudently plan for long-term challenges, like the ones associated with climate change," he said.
On the other side of the aisle, Chairman James Comer, R-Ky., said the "ESG agenda prioritizes leftist ideology over the growth of retirees' investments." He added that Wednesday's hearing marks the first in a "series of oversight actions by this committee to explore ESG."