Anti-ESG House Bills Struggle to Clear Competing GOP Priorities

A key House Republican voice for the anti-environment, social and governance movement said he still sees multiple ways to advance at least a few ESG-related measures that have languished since clearing his committee over the summer, but the window to act is narrowing.

Rep. Patrick McHenry (R-N.C.), chairman of the House Financial Services Committee, acknowledged he has no definitive strategy on securing a floor vote for three anti-ESG bills reported out of his panel in July—dubbed as “ESG month.” Yet lawmakers have a “a waterfall of options” to get the legislation across the finish line, McHenry said. “It’s been the goal of all my legislative packages to give us a variety of optionality.”

State and federal Republican lawmakers and attorneys general have seized on attacking ESG investment guidelines in recent years, particularly those requiring corporate climate disclosures and those allowing pension funds and others to rely on socially-conscious investing criteria. The congressional measures are supposed to mark federal efforts to advance the anti-ESG movement among conservatives—if McHenry and others can find a larger legislative vehicle to insert them into.

They could attach some or all of the bills to the fiscal 2024 National Defense Authorization Act, a must-pass annual defense policy bill, or “other bills that are going to make their way through,” such as annual spending bills, he said. Lawmakers aim to pass the authorization act by the year’s end. Congress bought itself more time on appropriations bills, with a stopgap measure passed this week extending funding for some agencies until January 19 and others until February 2.

“We’ve got bills that could make a difference and could have an impact that are waiting for consideration,” McHenry said. “So we’ll see.”

The anti-ESG bills that McHenry would like the full House to consider run the gamut of preventing the Securities and Exchange Commission from requiring companies to disclose their carbon emissions to bringing back a Trump-era rule that blocked investment advisors from considering ESG factors when giving advice to their clients. They advanced along party lines.

Progress on the committee’s bills came to a standstill for months, as Congress brought the government to the brink of a shutdown and Republicans wrangled over electing a new House speaker.

Rep. Bill Huizenga (R-Mich.), chair of the Financial Services Committee’s ESG Working Group, expressed frustration about time spent on the funding and speaker fights, which dampened his outlook for the anti-ESG bills’ chances of advancing in this environment.

“We have kind of hit pause on it; not intentionally, but it’s just all the other things that are that are going on,” Huizenga said in an interview, speaking just outside House Speaker Mike Johnson’s Capitol office. “You have to want to govern, and I’m afraid we’ve got some folks who aren’t interested in governing.”

Johnson, elected as speaker in late October, supports anti-environmental and -social causes that could be linked to the anti-ESG movement, but has not listed fighting ESG as a priority.

Bills in Limbo

The Financial Services Committee was one of two panels that advanced packages of anti-ESG bills earlier this year. The House Education and the Workforce Committee reported out four bills in September, also along party lines, that focus on removing ESG considerations from financial advisors’ advice to clients.

Combining all seven measures into a giant anti-ESG package is not in the cards, McHenry said. His focus is entirely on the bills that cleared his committee, he added.

Education and the Workforce Committee Chair Virginia Foxx (R-N.C.) said she hopes to see her committee-passed bills considered on the floor “soon,” but didn’t lay out a timeline.

“The last thing that millions of Americans want is the Biden administration issuing financially ‘woke’ investment edicts that put their retirement security at risk,” Foxx said in a statement to Bloomberg Law. “Enabling retirement plan fiduciaries to choose investments related to ESG factors is the equivalent of striking a match and setting piles of cash on fire.”

Even though the House has managed to stave off a government shutdown for now, the drama over ousting one speaker and electing another followed by the commotion on the chamber’s floor over the plan to keep agency lights on have hamstrung efforts on ESG-related bills, Huizenga said.

In addition to the possibility of spending bill amendments, one spot for these measures could be the annual defense policy bill, known as the NDAA, that McHenry referenced. The House and Senate passed their own versions of the authorization act but now must reconcile their differences on the two versions.

Time is running out for that path, though: The authorization bill is considered a must-pass by December 31 to authorize funding for the military, and so far, the House has been wasting time, McHenry said.

“The biggest issue is that we were blowing through House floor time, doing bills that we haven’t been able to pass, which is not useful for the House,” he said. “It’s embarrassing for us as Republicans.”

Companies Unaffected

Lawmakers that defend ESG considerations in investing and business decisions are breathing a sigh of relief that the measures have been “casualties” of the GOP’s infighting, Rep. Sean Casten (D-Ill.), chair of the Sustainable Investing Caucus, said.

Bringing the government to the brink of a shutdown wasn’t ideal, Casten said, but if that means slowing the momentum of Republicans’ anti-ESG goals, then so be it.

“Whatever you want Congress to be doing right now has been killed by the incompetence of the Republican Party,” he said. “I don’t think shutting down ESG financing is the No. 1 casualty, but if that’s what bothers Mr. Huizenga, I’m sorry for him—I’ll send him a condolence card.”

The path to passage is even more difficult on the Senate side. The measures have advanced along party lines and are unlikely to clear the Democratic-controlled chamber as standalone bills. Even if they make their way into into a year-end authorization bill or a spending package and somehow become law, their impacts on companies will be negligible, Elizabeth Dawson, a partner at Crowell & Moring LLP said.

Because the bills focus on company disclosure and investments, rather than corporate activity, they would not prevent companies from voluntarily disclosing things like their carbon footprint. Large companies that operate in California will also need to comply with a new law there that will require them to disclose their direct carbon emissions starting in 2026 and those of their suppliers and customers in 2027, she said.

“This is not about regulating what a company can and cannot do, or can and cannot disclose. It’s more about not allowing regulatory bodies to require certain things,” Dawson said.

Companies have begun to think about what happens if power changes hands in a year in Washington. Lawmakers often introduce bills, or even pass them on the floor, to build momentum for future years. If Republicans capture a government majority in 2024, these measures could suddenly have fresh life, Dawson said—but that’s a long way off.

“Certainly, companies are looking at these bills in terms of thinking about what might happen if the political winds shift next year,” she said. “But as of right now, this has not been a priority in terms of what clients have been asking us about.”