Federal Initiatives

Actions Restricting Use of ESG Considerations in Investment Decisions

State Government Employee Retirement Protection Act

• Status
  • Final version published (3/18/22)
  • Draft amendments introduced (4/6/22)

• Summary
  • Directs government pension plan fiduciaries to consider only pecuniary factors in their investment decisions and to weigh ESG factors solely according to their impact on economic risk and return.
  • Prohibits voting shares to promote non-pecuniary or non-financial goals.

Actions Targeting Entities that Boycott Fossil Fuel and/or Firearms/Ammunition Companies

Energy Discrimination Elimination Act

• Status
  • First draft introduced (7/29/21)
  • Second draft introduced (12/3/21)

• Summary 
  • No final version published.
  • Contains essentially the same provisions as Texas SB13 and Oklahoma HB2034, which were introduced about four months earlier. Slightly differing versions have been introduced in 2022 in Minnesota (HF4904, died in committee), Indiana (HB1224, died in committee) and Kentucky (SB205, passed 4/8/22).

Promote ESG Factors in Investment and/or Proxy Voting Decisions

H.R.4759 - Environmentally Sustainable Growth Act of 2023

• Status
  • Introduced by Rep. Vargas (D-CA) & referred to the House Committee on Financial Services (7/19/23)

• Summary
  • A bill to provide for disclosure of additional material information about public companies, and for other purposes. Requires audited financial statements, disclosure of environmental, social, and governance metrics, and definition of ESG metrics.

H.R.1261 - Federal Employees Sustainable Investment Act

• Status
  • Introduced by Rep. Schiff (D-CA) & referred to the House Committee on Oversight and Accountability (2/28/23)

• Summary
  • Provides for a corporate responsibility investment option under the Thrift Savings Plan, accounting for a minimum of certain enumerated ESG factors (corporate governance, environmental practices, workplace relations & benefits, product safety & impact, international operations & human rights, involvement with repressive regimes, community relations).

H.R.1119 - Freedom to Invest in a Sustainable Future Act

• Status
  • Introduced by Rep. DelBene (D-WA) & referred to the House Committee on Education and the Workforce (2/21/23)

• Summary

  • Freedom to Invest in a Sustainable Future Act. A bill to amend the Employee Retirement Income Security Act of 1974 to permit retirement plans to consider certain factors in investment decisions.

Actions Promoting Integration of ESG Considerations in Investment Decisions

SB 523: Freedom to Invest in a Sustainable Future Act

• Status
  • Read twice and referred to Committee on Health, Education, Labor, and Pensions (2/16/23)

• Summary
  • Introduced by Senator Tina Smith (D-MN). Codifies the Department of Labor's new ESG rule.
  • Amends ERISA to permit retirement plan fiduciaries to consider ESG factors when selecting investments. Permits plans to consider ESG factors as tie-breakers when deciding between otherwise comparable options.

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

H.R.5340 - Providing Complete Information to Retirement Investors Act

• Status
  • H.R. 5340 introduced by Rep. Banks (R-IN-3) (9/5/23); referred to the Committee on Education and the Workforce
  • 9/14/2023: Ordered to be Reported (Amended) by the Yeas and Nays: 23 - 19
  • 9/26/2023: Reported (Amended) by the Committee on Education and the Workforce; Placed on the Union Calendar, Calendar No. 183

• Summary 
  • Implements a notice requirement on defined contribution plans explaining the difference between choosing from investments selected by ERISA fiduciaries and choosing from investments through a brokerage window.

H.R.5339 - RETIRE Act

• Status
  • H.R. 5339 introduced by Rep. Allen (R-GA-12) (9/5/23); referred to the Committee on Education and the Workforce
  • 9/14/2023: Ordered to be Reported (Amended) by the Yeas and Nays: 23 - 19
  • 9/26/2023: Reported (Amended) by the Committee on Education and the Workforce; Placed on the Union Calendar, Calendar No. 184

• Summary 
  • Roll back ESG To Increase Retirement Earnings Act (RETIRE Act). Clarifies that financial institutions must base decisions on an investment solely on economic factors.

H.R.5338 - No Discrimination in My Benefits Act

• Status
  • H.R. 5338 introduced by Rep. Good (R-VA-5) (9/5/23); referred to the Committee on Education and the Workforce
  • 9/14/2023: Ordered to be Reported (Amended) by the Yeas and Nays: 23 - 19
  • 9/26/2023: Reported (Amended) by the Committee on Education and the Workforce; Placed on the Union Calendar, Calendar No. 185

• Summary 
  • To amend the Employee Retirement Income Security Act of 1974 to establish that fiduciaries must act with prudence and loyalty when selecting service providers for pension plans.

H.R.5337 - Retirement Proxy Protection Act

• Status
  • H.R. 5337 introduced by Rep. Houchin (R-IN-9) (9/5/23); referred to the Committee on Education and the Workforce
  • 9/14/2023: Ordered to be Reported (Amended) by the Yeas and Nays: 23 - 19
  • 9/26/2023: Reported (Amended) by the Committee on Education and the Workforce; Placed on the Union Calendar, Calendar No. 186

• Summary 
  • States that the decision to exercise a shareholder right is subject to the prudence and loyalty duties under ERISA. It also states that proxies held by ERISA plans must be voted in the economic interest of the plan, not used to advance radical policies.

CalPERS hands over trove of climate-related documents demanded by House GOP

• Status
  • Ongoing since December 2022, article published 8/17/2023

• Summary 
  • In response to alleged coordination between CalPERS, Ceres, and Climate Action, 100+ House Republicans are requiring the California Public Employees' Retirement System to turn over “thousands of pages of documents” related to its climate-related investment practices to the House Judiciary Committee, led by Rep. Jim Jordan (R-OH).

H.R.4790 - Guiding Uniform and Responsible Disclosure Requirements and Information Limits Act of 2023

• Status
  • H.R. 4790 introduced by Rep. Huizenga (R-MI) (7/20/23); referred to the Committee on Financial Services;
  • 7/27/2023: Ordered to be Reported (Amended) by the Yeas and Nays: 29 - 21

• Summary 
  • Would require the SEC to conduct a study to examine and evaluate—
    (1) the detrimental impact and potential detrimental impact of each of the Directives on—
    (A) United States companies, consumers, and investors; and
    (B) the economy of the United States;
    (2) the extent to which each of the Directives aligns with international conventions and declarations on human rights and environmental obligations; and
    (3) the legal basis for the extraterritorial reach of each of the Directives

H.R.4767 - Protecting Americans’ Retirement Savings from Politics Act

• Status
  • H.R. 4676 introduced by Rep. Steil (R-WI) (7/20/23); referred to the Committee on Financial Services;
  • 7/27/2023: Ordered to be Reported (Amended) by the Yeas and Nays: 29 - 21

• Summary 
  • It would require the registration of proxy advisors, amend Exchange Act 13(f) to require institutional investment managers to make certain disclosures regarding their use of proxy advisors, and include certain new disclosure requirements for IIMs, and amend the Advisers Act to create a new category of “passively managed funds” for which advisers are instructed to either (a) vote in accordance with the beneficial owner’s instructions; (b) vote in accordance with the operating company’s recommendation; or (c) abstain from voting (subject to a safe harbor for non-routine matters).  It also would amend the Advisers Act to define best interest as limited to those using pecuniary factors, which may not be subordinated to or limited to non-pecuniary factors absent written consent.

H.R.4664 - Making appropriations for financial services and general government for the fiscal year ending September 30, 2024, and for other purposes.

• Status
  • H.R. 4664 introduced by Rep. Womack (R-AR) (7/17/23)

• Summary 
  • A bill making appropriations for financial services and general government for the fiscal year ending September 30, 2024, and for other purposes. Sec. 754.  None of the funds made available by this Act, or any other Act, may be used to make investments under the Thrift Savings Plan in certain mutual funds that make investment decisions based primarily on environmental, social, or governance criteria.

H.R.4640 - To authorize the exclusion of shareholder proposals from proxy or consent solicitation material if the subject matter of the shareholder proposal is environmental, social, or political.

• Status
  • H.R. 4640 introduced by Rep. Donalds (R-FL) (7/14/23); Referred to the House Committee on Financial Services.

• Summary 
  • "A shareholder proposal submitted to an issuer pursuant to section 240.14a–8 of title 17, Code of Federal Regulations, may be excluded by an issuer from its proxy or consent solicitation material for a meeting of the shareholders of such issuer if the subject matter of the shareholder proposal is environmental, social, or political (or a similar subject matter)."

H.R.4600 - Protecting Retail Investors Savings Act

• Status
  • H.R. 4600 introduced by Rep. Barr (R-KY) (7/13/23); Referred to the Committee on Financial Services.

• Summary 
  • A bill to amend the Investment Advisers Act of 1940 to specify requirements concerning the consideration of pecuniary and non-pecuniary factors, to require the Securities and Exchange Commission to conduct a study on climate change and other environmental disclosures in the municipal bond market, and to require the Securities and Exchange Commission to conduct a study on the solicitation of municipal securities business.

House Republicans Launch Investigation Into BlackRock, Vanguard, Others Over ESG Practices

• Status
  • Published (7/6/23)

• Summary

  • Republican Congressman Jim Jordan (OH), joined by his colleagues Thomas Massie (KY) and Dan Bishop (NC), sent four letters to the heads of Glasgow Financial Alliance for Net Zero, BlackRock, State Street, and Vanguard.

  • In the letters, the Representatives claim that the entities are potentially violating federal antitrust law through their pro-ESG actions and argue that reaching net-zero emissions would be harmful to Americans and the coal, gas, and oil industries.

H.R.4237 - To amend the Investment Advisers Act of 1940 and the Employee Retirement Income Security Act of 1974 to specify requirements concerning the consideration of pecuniary and non-pecuniary factors.

• Status
  • H.R. 4237 introduced by Rep. Barr (R-KY) (6/21/23); Referred to the Committee on Financial Services, and in addition to the Committee on Education and the Workforce

• Summary 

  • It would amend ERISA to specify that a retirement plan fiduciary shall be considered acting solely in the interest of the participants and beneficiaries only if: 1) the investment does not subordinate the interests of the participants and beneficiaries in their retirement income or financial benefits under the plan to other objectives, including ESG objectives; and 2) the fiduciary does not sacrifice investment return or take on additional investment risk to promote goals unrelated to the plan or purposes of the plan.

  • It would permit investment options that use “non-pecuniary” factors to be used in a brokerage window, provided certain conditions are met. It also would permit ESG factors to be considered through a “tiebreaker test,” but would require stringent documentation requirements among fiduciaries similar to the 2020 Trump ESG Rules. Also similar to the 2020 Rule, it would prohibit non-pecuniary ESG factors from being used for default investment options.

H.R. 3612 - No ESG at TSP Act

• Status
  • H.R. 3612 introduced by Rep. Roy (R-TX) (5/23/23)

• Summary 
  • Rep. Roy was joined by 7 Republican colleagues in introducing the “No ESG at TSP Act” to prevent the federal Thrift Savings Plan (TSP) from offering some ESG-themed funds to its participants. The legislation would prohibit TSP from allowing participants to invest their retirement savings into funds that make investment decisions based on environmental, social, governance, or political criteria. TSP is the largest defined contribution plan in the world and benefits federal employees and servicemembers. The legislation addresses the relatively new mutual fund window that is available to the roughly 6.5 million government workers who participate in the TSP.

H.J.Res.30: Providing for Congressional Disapproval of the DOL’s Final ESG Rule

• Status
  • H.J. Res. 30 introduced by Rep. Barr (R-KY) and Sen. Braun (R-IN) (2/7/23)
  • House approved the CRA resolution on a near party-line vote of 216-204 (2/28/23)
  • Passed in the Senate (3/1/23)
  • President Biden vetoed (3/20/23)
  • House Republicans failed to get the necessary two-thirds vote to override President Biden’s veto (3/23/23)

• Summary 
  • Resolution that Congress disapproves of the DOL’s final rule relating to “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights” and declares that such rule shall have no force or effect.
  • President Biden vetoed H.J. Res. 30, stating: “Retirement plan fiduciaries should be able to consider any factor that maximizes financial returns for retirees across the country. That is not controversial — that is common sense.” 

H.R.1506 - Advisory Committees Free of ESG Act of 2023

• Status
  • Introduced by Rep. Jackson (R-TX) & referred to the House Committee on Oversight and Accountability (3/9/23)

• Summary 
  • Prohibits the establishment of ESG-related or ESG-based advisory committees.
  • Provides for the immediate termination of any advisory committee that has been authorized, permitted, or implemented. 

HR448: Putting Investors First Act of 2023

• Status
  • Introduced and referred to Committee on Financial Services (1/24/23)

• Summary 
  • Requires an investment company that holds itself out as offering an index fund where investments are made pursuant to ESG standards to disclose in tabular form the annual returns and fees charged to investors compared with that of comparable broad-based index fund offered by such investment company without ESG standards, or a reasonably similar comparison to a readily comparable broad-based index fund.
  • Requires the SEC to study and report to the Congress on shareholder proposals and proxy advisory firms that includes the costs that issuers incurred in responding to politically, environmentally, or socially motivated shareholder proposals.

Letter to SEC Chair on ESG

• Status
  • Published (1/13/23)

• Summary 
  • Republican Congressman John Rose (TN-06), a Member of the House Financial Services Committee, joined by his colleague Pete Sessions (TX-17) and Bryan Steil (WI-01), sent a letter to SEC Chair Gary Gensler criticizing recent SEC changes called “stakeholder capitalism.”
  • In the letter, the Members cite a steep decline in the success rate of no-action requests – especially those related to ESG issues.

H.Res.32 - Supporting the current definition of materiality in the securities laws and opposing new disclosure requirements outside the core mission of the Securities and Exchange Commission.

• Status
  • Introduced by Rep. Joyce (R-OH) & referred to the House Committee on Financial Services (1/12/23)

• Summary 
  • RESOLUTION supporting the current definition of materiality in the securities laws and opposing new disclosure requirements outside the core mission of the Securities and Exchange Commission. 

Target Entities That Boycott Certain Industries

ESG Part I: An Examination of Environmental, Social, and Governance Practices with Attorneys General

• Status
  • Announced (5/3/23)

• Summary 
  • House Committee on Oversight and Accountability Chairman James Comer (R-Ky.) organized a full committee hearing on May 10, 2023 to examine the concerns of state attorneys general related to the integration of ESG standards by asset managers and how these ESG principles are being used. Witnesses included: Sean Reyes, Attorney General of Utah, Steve Marshall, Attorney General of Alabama, and Michael Frerichs (Minority Witness), Illinois State Treasurer. 

Comer Announces Hearing on Damaging ESG Practices with Attorneys General

• Status
  • Announced (5/3/23)

• Summary 
  • House Committee on Oversight and Accountability Chairman James Comer (R-Ky.) will hold a full committee hearing on May 10, 2023 to examine the concerns of state attorneys general related to the integration of ESG standards by asset managers and how these ESG principles are being used.
  • Witnesses include Sean Reyes, Attorney General of Utah, and Steve Marshall, Attorney General of Alabama. 
    
     

HR53: Firearm Industry Non-Discrimination Act

• Status
  • Introduced and referred to Committee on Oversight and Accountability (1/9/23)

• Summary 
  • Prohibits the Federal Government from entering into contracts with an entity that discriminates against firearm or ammunition industries, and for other purposes, except for a contract for the procurement of goods or services that is a sole-source contract.

Actions Restricting Use of ESG Considerations in Investment Decisions

S.1563 - Maximize Americans' Retirement Security Act

• Status
  • S. 1563 introduced by Rep. Braun (R-IN) (5/11/23);  referred to the Committee on Health, Education, Labor, and Pensions

• Summary 
  • A bill "to amend the Employee Retirement Income Security Act of 1974 to clarify the fiduciary duty of plan administrators to select and maintain investments based solely on pecuniary factors, and for other purposes. … when choosing between or among investment alternatives that a fiduciary is unable to distinguish on the basis of pecuniary factors alone, the fiduciary may use non-pecuniary factors as the deciding factor in the selection or maintenance of an investment if the fiduciary furnishes to participants documentation" on a few requirements.

S.2282 -Ensuring Sound Guidance Act

• Status
  • S. 2282 introduced by Rep. Cotton (R-AR) (7/12/23);  referred to the Committee on Banking, Housing, and Urban Affairs

• Summary 
  • A bill to amend the Investment Advisers Act of 1940 and the Employee Retirement Income Security Act of 1974 to specify requirements concerning the consideration of pecuniary and non-pecuniary factors, and for other purposes.

S.2147 - A bill to amend title 5, United States Code, to prohibit investments under the Thrift Savings Plan in certain mutual funds that make investment decisions based primarily on environmental, social, or governance criteria, and for other purposes.

• Status
  • S. 2147 introduced by Rep. Lee (R-UT) (6/22/23);  referred to the Committee on Homeland Security and Governmental Affairs

• Summary 
  • No text or summary yet available.

S.1891 - Stop TSP ESG Act

• Status
  • S. 1891 introduced by Rep. Cruz (R-TX) and referred to Committee on Oversight and Accountability (6/8/23)

• Summary 
  • A bill "to amend title 5, United States Code, to prohibit qualified professional asset managers from exercising voting rights associated with the ownership of securities by the Thrift Savings Fund."

S.1799 - Putting Investors First Act of 2023

• Status
  • S. 1799 introduced by Rep. Hagerty (R-TN) (6/1/23); referred to the Committee on Banking, Housing, and Urban Affairs.

• Summary 
  • Amends the Securities Act of 1933. Any covered entity that retains the services of a proxy advisory firm with respect to the preceding year shall provide to the beneficiaries and customers of the covered entity, as applicable, a report that includes the percentage of votes cast on environmental-, social-, or governance-related shareholder proposals that follow proxy advisory firm recommendations for each proxy advisory firm retained by the covered entity.

Letter to the Department of Treasury concerning the Federal Insurance Office’s ESG agenda

• Status
  • Published (5/2/23)

• Summary 
  • Republican Senators from various states led by Sen. Grassley (Iowa) issued a letter to Janet Yellen, the U.S. Department of the Treasury Secretary, "raising concerns with the Federal Insurance Office’s (FIO’s) efforts to force the Biden administration’s unrealistic environmental, social, and governance (ESG) agenda onto the state-regulated insurance industry." They believe such move "could result in state insurance regulators and insurers being coerced into adopting costly, one-size-fits-all climate-mitigation strategies."

SB428: Firearm Industry Non-Discrimination Act

• Status
  • Read twice and referred to Committee on Homeland Security and Governmental Affairs (2/15/23)

• Summary 
  • Prohibits the U.S. government from entering into contracts with an entity that discriminates against firearm or ammunition industries, and for other purposes. Excludes a contract for the procurement of goods or services that is a sole-source contract.

S.J.Res.8: A joint resolution providing for congressional disapproval of the DOL’s Final ESG Rule

• Status
  • Announced (2/1/23)
  • Read twice and referred to the Committee on Health, Education, Labor, and Pensions (2/7/23)

• Summary 
  • Introduced by all Republican Senators and Democrat Joe Manchin (WV). Same as H.J.Res.30 above.
  • Resolution that Congress disapproves of the DOL’s final rule relating to “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights” and declares that such rule shall have no force or effect.

Letter to Law Firms Warning about ESG Initiatives

• Status
  • Published (11/4/22)

• Summary 
  • Republican Senators from 5 states including: Sens. Cotton (Arkansas), Rubio (Florida), Grassley (Iowa), Blackburn (Tennessee), and Lee (Utah) issued letters to 51 law firms warning of the possible antitrust violations these law firms’ clients may commit if they pursue ESG initiatives and requesting the law firms to preserve relevant documents for Congress’s oversight.

Actions Promoting Integration of ESG Considerations in Investment Decisions

Final Rule: Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights

• Status
  • Published (10/13/21)
  • Comment period closed (12/31/21)
  • Published (12/1/22), most provisions became effective on 1/30/23, and certain provisions pertaining to exercises of shareholder rights will become effective on 12/1/23.

• Summary
  • Clarifies that a plan fiduciary’s determination with respect to an investment or investment course of action must be based on factors that the fiduciary reasonably determines are relevant to a risk and return analysis, and that such factors may include the economic effects of climate change and other ESG factors on the particular investment or investment course of action.
  • Applies the same standard to qualified default investment alternatives (QDIAs) as to other investments—i.e., a focus on relevant risk-return factors.
  • Confirms that when a fiduciary has prudently concluded that competing investments equally serve the financial interests of the plan over the appropriate time horizon (also known as the tie-breaker scenario), the fiduciary is not prohibited from selecting the investment or investment course of action based on collateral benefits other than investment returns.