Rep. Patrick McHenry (R-NC) and House Financial Service Committee Chairman Maxine Waters (D-CA) hearken to testimony from David Marcus, Facebook’s CEO of Calibra on “Examining Facebook’s proposed cryptocurrency and its impact on consumers, investors and the American Financial System” at the Capitol in Washington, July 17, 2019.
Joshua Roberts | Reuters
Republicans hoping red states’ campaigns against green investment could go national when their party takes over Congress next month could also be dissatisfied.
Incoming House Financial Services CEO Patrick McHenry, a Republican from North Carolina, has given no indication he plans to push through a federal version of latest state regulations designed to isolate firms that deal with so-called ESG investments that emphasize environmental records, social or corporate governance of the firms they spend money on when he spoke recently Council CFO CNBC Summit in Washington. DC to an audience of top CFOs from firms across the market.
He also rejected being known as a “vocal opponent” of ESG.
“I do not think that is an accurate characterization of my view,” McHenry said in an interview with CNBC’s senior Congressional correspondent Ylan Mui. He is anxious that corporations are leaning towards politics and potentially shifting away from specializing in the bottom line of shareholders and helpful owners, “and they’re doing so due to the approval of Washington regulators. I feel corporations should deal with their core activities,” he said.
States led by Texas and West Virginia have passed laws that purportedly prohibit state agencies from doing business with financial firms that “boycott” fossil fuels. The world’s largest money managers, incl Black Rock and State Street Global Advisors have been under pressure from the right and last week testified in Texas about ESG and climate investments. Vanguard Group was also as a result of testify, but after the fund giant abandoned the investment industry’s climate alliance, it has modified.
McHenry, rated as considered one of the most moderate Republicans in the House of Representatives by the non-profit organization GovTrack US, doesn’t seem fascinated by the state’s approach.
As a substitute, he said, it will deal with oversight of a pending Securities and Exchange Commission regulation that will force firms to reveal details about greenhouse gas emissions from their operations, the use of electricity from carbon-burning sources corresponding to coal and natural gas and emissions created when people and other firms use their products.
“A few of the regulations which are being rejected are incorrect,” McHenry told CFOs. “He plays politics with corporations in the name of keeping corporations out of politics.”
![Top House Republican on understanding ESG](https://image.cnbcfm.com/api/v1/image/107169240-16715705363ED2-REQ-TOP-HOUSE-122022.jpg?v=1671626857&w=750&h=422&vtcrop=y)
But there’s laws on Capitol Hill sponsored by some Republicans that will take an approach much like state motion.
The “No ESG at TSP” bill, sponsored by Texas Republican Chip Roy, would prohibit TSP from allowing participants to take a position their retirement savings in funds that make investment decisions based on environmental, social, governmental or political criteria, in line with Roy’s office. TSP is the largest defined contribution plan in the world, utilized by federal employees and military service members.
Roy’s original project co-sponsors are all members of the House Freedom Caucus, a bunch of some 40 of the House’s staunchest conservatives who’re engaged in a battle with Republican leader Kevin McCarthy over who will be the speaker when the party takes power in the House in January. The bill of the same name was introduced in the Senate by Mike Lee of Utah, who’s rated by the right-wing Heritage Motion group as 22% more conservative than the average Senate Republican.
Roy didn’t reply to multiple requests for comment. His co-author of the bill, South Carolina congressman Ralph Norman, gave a press release to CNBC saying, “While we hope to crack down on this ESG nonsense, the latest chairman McHenry will resolve the direction the committee will take.” Ultimately, what we want above all is strict oversight and a stop to all other absurdities coming from this administration inside our Committee’s jurisdiction – including ESG.”
McHenry stressed that he supports many parts of ESG, highlighting the emphasis on responsible corporate governance, which he said “has a major impact on economic performance.”
The House Financial Services Committee is investigating bankrupt crypto firm FTX, which latest CEO John Ray has described as a “total failure” of management. McHenry cited the proven fact that FTX had no board of directors. “Governance matters, but after we get to the issue of environmental policy, Congress needs to handle climate change,” McHenry told a CNBC event. “It doesn’t put me in opposition to management standards or sustainability usually.”
On climate change, McHenry said the primary job of corporations just isn’t to steer the fight: as a substitute, he said, leadership should come from Congress and other policy makers.
“It’s imperative that Congress tackles climate change, not regulations that force large corporations to do what Congress should do,” said McHenry, whose climate voting record is rated 6 out of 100 by League of Conservation voters. .
McHenry is critical of the SEC’s proposed rule and said oversight of the SEC’s implementation of the standard could be of interest to the committee. “The primary role in responding to climate change must be those in public office. … The SEC needs strict oversight, real oversight, in response to what the SEC is attempting to implement in a short time,” he said.
SEC spokeswoman Aisha Johnson declined to comment on the timing of the regulatory elements, but said it could take a mean of 18 to 24 months to go from proposal to final adoption. The commission reopened the period for public comment on the rules in October.
The committee Democrat said McHenry’s oversight threatened to do what the chairman criticized: interfering with the flow of capital in the private sector towards climate change mitigation. And he described the upcoming rules as an advance on rules allowing investors to learn more about the environmental risks of the firms they spend money on.
“It is a pro-market solution, this can be a pro-transparent solution,” said Sean Casten, a Democratic Illinois congressman and former entrepreneur and CEO of unpolluted energy who co-wrote the laws that directed the SEC to develop the upcoming rule. “If we resolve First solar is “woke up” and Exxon just isn’t, we denounce the austerity austerity plan as shit [long-term] returns,” he said.