House Working Group Going After ESG
March 2, 2023
A House working group is exploring ways to weaken or eliminate ESG impact assessments. Chairman of the House Financial Services Committee, Patrick McHenry, says that the goal will be to rein in the SEC’s regulatory overreach, and “reinforce the materiality standard as a pillar of our disclosure regime.” He appears to have his sights on market actors who support pro-ESG activities by allegedly misusing “the proxy process or their outsized influence to impose ideological preferences.” According to a press release, the working group’s purpose is to combat the threat to capital markets posed by environmental, social, and governance proposals. Huizenga says that the SEC’s proposed climate disclosure rule is a prime example of regulatory overreach. The SEC’s rationale is that failure to effectively assess ESG risks could have a negative impact on financial performance based on some customers’ preferences for eco-friendly products, higher operating expenses due to rising fossil fuel energy prices, and higher compliance costs from litigation and enforcement actions.
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