“However, the reality is if you’re expecting any meaningful legislation to emerge from all the Republicans’ talking points, think again,” said Cowen analyst Miller. — Bloomberg
WASHINGTON: For all of the Republican Party’s furious opposition to environmental, social and governance (ESG), its efforts to accomplish something on the legislative front have fallen short.
At least that’s the view of Cowen Inc analyst John Miller, who closely tracks regulatory affairs for the firm’s Washington Research Group.
House Republicans held a series of hearings last month, which Miller monitored. At the meetings, the lawmakers called for squashing the Securities and Exchange Commission’s (SEC) efforts to enforce more transparent corporate disclosure requirements for ESG factors.
In addition to taking on the SEC, GOP lawmakers are pushing for stricter oversight of proxy advisory firms and also favour limiting or even excluding ESG-focused investments from Employee Retirement Income Security Act (Erisa) funds.
“However, the reality is if you’re expecting any meaningful legislation to emerge from all the Republicans’ talking points, think again,” Miller said.
Of course, the big reason is that while a slim-GOP majority controls the House of Representatives, a similarly small majority of Democrats controls the Senate.
Indeed, Miller said the Republican initiative to protect industries responsible for churning out fossil fuels will have little, if any, overall impact on investors.
Money flows to clean energy and clean transportation companies will go on unaffected and most money managers will continue to invest anyway that they want, he said.
“While Democrats are increasingly concerned that anti-ESG efforts will slow capital flows, we don’t think so because no matter what happens in the Republican-controlled House, there’s little chance the Democrat-controlled Senate will take up the issue,” Miller said.
The two areas where the Republicans may make headway, however, centre on proxy advisory firms and Erisa, Miller said.
Still, he added that such efforts won’t have any long-lasting impact on the financial markets.
Erisa is a federal law that sets minimum standards for most voluntarily established retirement and health plans to provide protections for individuals who take part.
The debate around it focuses on whether fiduciaries can consider the climate crisis and other ESG factors when selecting investments and exercising shareholder rights.
While Democrats back this position, Republicans want to eliminate any connection between Erisa and ESG.
They contend that fund managers should care only about generating the highest returns possible for investors, and nothing else. This despite research showing ESG investing strategies can be equal to or more profitable than non-ESG strategies. — Bloomberg
