By Cathy Becker, Responsible Finance Campaign Director 

In September, the U.S. House of Representatives passed a pair of bills targeting investing that considers environmental, social, and corporate governance, or ESG, factors.  

These two bills rolled together eight previous bills that attacked all aspects of responsible investing, including disclosure requirements, shareholder advocacy, banking regulations, and retirement plans.  

HR 4790, “Prioritizing Economic Growth over Woke Policies Act,” would in part: 

• Require disclosure only on “material” factors and allow companies to decide what is material 

• Create an “advisory committee” for the SEC made up of corporate executives but not shareholders 

• Allow corporations sole discretion on whether to include a shareholder resolution on their proxy ballots 

• Significantly increase requirements to resubmit a shareholder resolution within five years 

• Require banking regulators to submit extensive reports to Congress, including any interaction with an NGO on climate-related risk 

HR 5339, “Protecting Americans’ Investments from Woke Policies Act,” would in part require retirement plans to: 

• Separate “pecuniary” and “non-pecuniary” factors, which legal experts say is impossible 

• Vote on shareholder resolutions based only on profit 

• Label certain fund options as “prudently selected” and others as “not prudently selected” 

HR 4790 passed 215-203, on a party line vote with three Democrats – Henry Cuellar (TX-28), Jared Golden (ME-2), and Marie Perez (WA-3) -- joining Republicans in favor. HR 5339 passed 217-206 with three Democrats – Jared Golden (ME-2), Mary Peltola (AK-at large), and Marie Perez (WA-3) -- joining Republicans in favor. 

Rep. Bill Huizenga (MI-4), leader of the House Republican ESG working group, claimed in a press release that HR 4790 “corrects the misguided social policies that have been weaponized by rogue regulators and liberal activist investors at the expense of financial returns." 

However, the fact is that anti-ESG legislation is based on the false premise that climate is not a "material” factor and investing with climate in mind will lower returns. Nothing is more material than hurricanes and wildfires destroying American homes and cities, making large swaths of the country uninsurable and raising insurance rates on everyone else. Such legislation is designed not to help American families prosper, but to prolong the profits of the fossil fuel industry while stymieing the transition to a clean energy future. 

Fossil fuel agenda 

Although these bills are not expected to pass the Senate – and would face an almost certain veto from President Joe Biden if they did – their floor vote in Congress shows that attacks on responsible investing are not going anywhere.  

Why? Because the people and organizations behind these attacks have close ties and large amounts of funding to carry out the fossil fuel agenda.  

Take the two key witnesses in a House subcommittee hearing held the week before the vote titled “The Fall of ESG: Scrutinizing the Failed Use of Environmental, Social, & Governance Standards and the Influence of Proxy Advisors”: 

• Charles Crain, vice president at National Association of Manufacturers, whose board of directors includes representatives from ExxonMobil, ConocoPhillips, Shell, Continental Resources, Devon Energy, Koch Industries, Energy Transfer, Dow, Southern Company, Dominion Energy, and Ariel Corporation. 

• Tim Doyle, founder of Doyle Strategies, who has worked for organizations funded by the oil and gas industry, including the American Council for Capital Formation, a free market think tank that has taken $1.6 million from ExxonMobil, $600,000 from Koch foundations, and $350,000 from the American Petroleum Institute.  

In addition, right-wing judicial activist Leonard Leo told the Financial Times he is behind these attacks, launching a $1 billion crusade to “crush liberal dominance” across corporate America.  

“Expect us to increase support for organizations that call out companies and financial institutions that bend to the woke mind virus spread by regulators and NGOs, so that they have to pay a price for putting extreme leftwing ideology ahead of consumers,” Leo said. 

State legislation 

These legislative attacks on sustainable investing aren’t limited to the federal arena. In discussing the two anti-ESG bills that passed the House, Rep. Sean Casten, co-founder of the Sustainable Investment Caucus, pointed to similar legislation which has cost billions of dollars in several states.  

“If states are the laboratories of democracy, then we are taking the wrong lessons from the anti-woke agenda,” Casten said at a press conference organized by Unlocking America’s Future.  

• In Texas, legislation blacklisting certain companies for their supposed boycott of fossil fuels could cost the state as much as $821.1 million and 8,800 jobs by the end of this year, according to a report by the Perryman Group.  

• In Oklahoma, a law prohibiting pension funds and cities from doing business with financial firms accused of boycotting fossil fuels cost over $180 million. Judge Sheila Stinson issued a permanent injunction barring enforcement of the law in July. 

• In Indiana, the state budget office found that a bill forcing pension funds to divest from asset managers who consider ESG factors would cost $6.7 billion over the next decade in sub-par returns.  

• In Kansas, the budget division found that an anti-ESG bill could cost public service retirees up to $3.6 billion in lower returns over 10 years.  

Due in large part to these material costs, states passed many fewer anti-ESG bills this year than last year, according to research and advising firm Pleiades Strategy.  

• In 2023, 165 anti-ESG bills and resolutions were proposed in the states; of those, 31 ultimately passed.  

• In 2024, 161 anti-ESG bills and resolutions were proposed in the states; of those, only six passed. 

Sustainable investing is financially sound 

The failure of anti-ESG laws in the states highlights the importance of taking climate risks into account, especially for long-term investments such as retirement and college funds.  

Sustainable investing performs as well or better than conventional investing, especially over time, while fossil fuel stocks have underperformed for the past decade.  

Perhaps this is why voters overwhelmingly oppose efforts to limit ESG investing and disclosure. For example, a poll by Penn State and ROKK Solutions found 63% of voters do not believe the government should set limits on corporate ESG investments.  

Another poll by Public Citizen found voters oppose limiting the information corporations must disclose to retirement fund managers and would reward politicians who support requiring corporations to disclose ESG information to investors and the public.  

What can you do? 

While the onslaught of anti-ESG state and federal legislation may feel overwhelming, there is a lot you can do to push back: 

• Tell your House representative to join the Sustainable Investment Caucus 

• Use the Green America Get a Better Bank Map to move your money from big banks that finance fossil fuels to a community development bank or credit union 

• Use our guide to find a credit card issued by a bank that doesn’t disproportionately finance fossil fuels 

• Use our Climate Smart Insurance Directory to find home and auto insurance from a provider that doesn’t insure or invest heavily in fossil fuels 

• Find out where your retirement funds are invested, and if you don’t have access to fossil-free options, use our guide to ask your employer for sustainable funds 

By aligning our money with our values, we can signal to financial institutions that it’s time to move the money pipeline away from fossil fuels and toward building a more sustainable and equitable world.