The Republican-led House passed a spate of bills on Sept. 19 aimed at combating the influence of environmental, social and governance investing in the nation's financial markets.
Four bills introduced in July 2023 were combined into the Promoting Economic Growth Over Woke Policies Act, which passed in a 214-203 vote. Three Democrats voted in favor of the package.
However, the legislation is unlikely to progress further this congressional session, as Democrats control of the Senate and White House.
Within the package, the Guiding Uniform and Responsible Disclosure Requirements and Information Limits Act, or GUARDRAIL Act, would, among other things, stipulate that public companies are required to disclose only material information, which under the bill does not include climate-related information. It would also require the Securities and Exchange Commission to publicly list and explain any non-material disclosure demands.
The bill is in response to the SEC’s public company climate disclosure rule that was finalized in March and is now halted while facing legal challenges. The rule requires public companies to divulge a host of climate-related information in their periodic reports and registration statements.
Rep. Bill Huizenga, R-Mich., the GUARDRAIL Act’s sponsor, said in a floor speech before the vote that his bill “prevents rogue regulators from mandating the disclosure of non-material ESG information that would overwhelm — not inform — everyday investors.”
The House also approved the Businesses Over Activists Act. The bill, introduced by Rep. Ralph Norman, R-S.C., clarifies that the SEC does not have the power to regulate shareholder proposals and would prevent the agency from forcing companies to include or discuss shareholder proposals.
Also passed was the Protecting Americans' Retirement Savings from Politics Act, introduced by Rep. Bryan Steil, R-Wisc., which includes provisions that would raise the resubmission thresholds for shareholder proposals and allow companies to exclude ESG proposals. It would also require large asset managers to conduct an economic analysis when voting against board recommendations and compel investors to consent to the use of non-pecuniary factors in decision-making.
Lastly, the American Financial Institution Regulator Sovereignty and Transparency Act, or American FIRST Act, introduced by Rep. Barry Loudermilk, R-Ga., would increase congressional oversight of federal banking regulators and their interactions with international organizations, like the Financial Stability Board and the Bank for International Settlements.
U.S. Chamber of Commerce Center for Capital Markets Competitiveness Executive Vice President Tom Quaadman welcomed the bill’s passage in a statement. The bill “advances necessary corporate governance reforms to shareholder proposals, proxy advisors and the Securities and Exchange Commission’s regulatory process,” he said.
In a separate statement, Maria Lettini, CEO US SIF: The Sustainable Investment Forum, a nonprofit whose members represent $5 trillion in assets under management, said the packages the House passed Sept. 18 and 19 — the former package would bar retirement plan fiduciaries from considering ESG factors when making investment decisions — are misguided.
“These two packages of bills are part of the shifting and ongoing attempt to undermine shareholder rights and transparency and threaten to stifle sustainable investing practices and American innovation more broadly,” Lettini said.
