Dept. of Labor ESG rule targeted by GOP Congressmen

Republicans are starting their all-out assault on ESG by targeting a Biden administration rule for retirement plan fiduciaries, Axios has learned.

Driving the news: Sen. Mike Braun (R-Ind.) and Rep. Andy Barr (R-Ky.) are attempting to dismantle a recent Department of Labor rule allowing retirement plan fiduciaries to consider climate change and other environmental, social and governance (ESG) factors in their investment actions.

Be smart: The CRA legislation won’t pass in a divided Congress, or with President Biden in office, but is designed to raise the issue’s profile and force lawmakers to go on the record about where they stand.

• “By finalizing rule-making allowing plan fiduciaries to consider ESG factors, Biden’s Department of Labor is steering capital away from the American energy sector, discriminating against oil and gas producers, driving up prices at the pump, and preventing investors from reaping returns from high-performing energy stocks,” Barr told Axios.

What they’re saying: The move is already gaining support from conservative groups eager to sink their teeth into the ESG fight.

• “Taking on Biden for attempting to make it easier for companies like BlackRock to put politics ahead of profits is only the beginning of what will be an ongoing effort to bring to light and take action against ESG, the biggest racket happening in America today,” Will Hild, executive director of the conservative Consumers’ Research Group, told Axios.

Between the lines: In a wide-ranging interview on Thursday, Barr — who will be a senior member of the House Financial Services committee in the new House GOP majority next year — dove into some of Republicans’ anti-ESG plans.

• “We’re going to have a very fulsome agenda combatting ESG, highlighting ESG for the fraud that it is,” Barr said, calling the climate-focused approach “a cancer within our capital markets.”
• Barr said there will be two phases of oversight — one focused on regulators, including bank regulators, the Federal Reserve and the Securities and Exchange Commission; and the second targeting the private sector, including banks and asset managers — paired with a legislative agenda.

• Barr explained his philosophy is that these ESG policies are not a market-driven phenomenon, which is the opposite of how firms like BlackRock and Vanguard describe them.

The other side: Pro-ESG entities argue climate investments and responsible governance are ripe for returns.

Zoom out: 19 attorneys general across the country have already begun investigating companies over their ESG ties.

• On Thursday in Texas, the state Senate hauled BlackRock and State Street Corp executives before a committee to blast their ESG agendas.

The bottom line: A growing faction of the conservative movement view these companies as cultural enemies who are misusing investment funds to promote pro-climate policies, and are eager to use congressional muscle to make the fight more high profile.

• As a result, key GOP committees are planning to haul in CEOs of investment firms — like BlackRock CEO Larry Fink — to testify before Congress.