"Business Group Criticizes Disclosure Rules as House Republicans Examine ESG Investing"

Industry Group Urges House Republicans to Make Reforms to ESG Investing

Republicans in the House Investigate ESG Investing

A major industry group, the National Association of Manufacturers (NAM), is urging House Republicans to make reforms to environmental, social, and governance (ESG) investing. In a letter to the House Financial Services Committee, NAM criticized recent rules and regulatory changes by the Securities and Exchange Commission (SEC) and called for the restriction of proxy voting and the disclosure of shareholder proposals. The letter, sent to committee Chairman Rep. Patrick McHenry and ranking member Rep. Maxine Waters, highlights the concerns that these changes are harmful to manufacturers and could jeopardize their ability to secure financing for growth.

Business Muscle Behind the GOP's Battle

NAM represents approximately 14,000 companies, including industry giants like Johnson & Johnson, Exxon Mobil, and Pfizer. This shows the significant business muscle behind the GOP's fight against policies that support ESG investing. The battle over ESG investing has become a highly contested policy issue, with Republicans arguing that it is a tool for liberals to impose their ideology, while Progressive Democratic lawmakers assert that considering ESG factors helps investors identify risks and opportunities.

Hearings and Legislative Measures

The House Financial Services Committee plans to hold a hearing examining the impact of ESG investing on investors and other hearings in the coming weeks. Republican lawmakers, who hold the majority in the House, aim to advance a package of legislation related to ESG investing. Although these measures are unlikely to pass in the Democratic-controlled Senate, they are expected to shape the debate on ESG investing.

Concerns over Proxy Advisory Firms

One of the main concerns raised by House Republicans is the influence of proxy advisory firms, particularly Institutional Shareholder Services (ISS) and Glass Lewis, which together dominate 97% of the proxy advisory market. Research from Stanford University shows that these firms' recommendations have a significant impact on how individual investors vote and how publicly traded companies are governed. NAM's CEO, Jay Timmons, expressed concerns about the lack of transparency and conflicts of interest associated with these firms' operations.

Recent SEC Changes and Responses from Proxy Firms

During the Trump administration, the SEC proposed business-friendly rules that would provide companies with advance knowledge of proxy firms' recommendations and require proxy advisors to inform their clients about the companies' responses. However, these rules were rescinded by the Biden administration. Republican state attorneys general have also expressed concerns about the recommendations of ISS and Glass Lewis, arguing that their recommendations could harm the economic value of investments and pensions. In response, ISS and Glass Lewis defended their voting policies and promised to continue serving the institutional investment community in accordance with their obligations. By addressing the concerns of industry groups like NAM and examining the influence of proxy advisory firms, House Republicans are actively working to shape the future of ESG investing in the United States.

Industry Group Urges House Republicans to Make Reforms to ESG Investing

Conclusion: Impact on New Businesses

The ongoing battle over environmental, social, and governance (ESG) investing, driven by industry groups and House Republicans, has the potential to impact new businesses in various ways. As the National Association of Manufacturers (NAM) urges reforms and the House Financial Services Committee plans hearings and legislative measures, emerging businesses need to pay attention to the evolving landscape. One potential impact is the availability of financing for growth. With concerns raised about the recent rules and regulatory changes by the Securities and Exchange Commission (SEC), particularly regarding proxy voting and shareholder proposals, new businesses may find it more challenging to secure funding. The tightening restrictions on ESG investing could limit the pool of potential investors, affecting the opportunities for innovative companies to attract capital. Moreover, the influence of proxy advisory firms, such as Institutional Shareholder Services (ISS) and Glass Lewis, plays a significant role in shaping how investors vote and how publicly traded companies are governed. The concerns raised by House Republicans regarding the lack of transparency and conflicts of interest surrounding these firms highlight potential challenges for new businesses seeking to navigate the ESG investing landscape. They may need to devise strategies to address and mitigate the impact of proxy advisory firm recommendations on their operations and reputation. While the legislative measures proposed by House Republicans are unlikely to pass in the Democratic-controlled Senate, they will contribute to shaping the ongoing debate on ESG investing. New businesses should closely monitor these developments to understand how regulations and policies may evolve, as it will impact their operations, access to capital, and investor perception. In conclusion, the reforms and discussions surrounding ESG investing initiated by industry groups and House Republicans will undoubtedly have implications for new businesses. By staying informed and adaptively responding to these changes, emerging companies can position themselves strategically and embrace the evolving landscape of ESG investing. Article First Published at: https://www.cnbc.com/2023/07/10/national-association-of-manufacturers-esg-disclosures.html