Patrick McHenryChairman

Washington, July 25, 2023 - Ahead of this week’s legislative markup, Republicans on the House Financial Services Committee introduced four comprehensive bills to address the threats environmental, social, and governance (ESG) initiatives pose to the American financial system. These measures represent the first step in Republican efforts to combat the ESG movement by restricting politically motivated, non-material disclosure mandates, reforming the proxy voting and shareholder proposal processes, increasing transparency for federal banking regulators, and limiting the Securities and Exchange Commission’s (SEC) authority to regulate shareholder proposals.

"Since taking over at the SEC, Chair Gensler has seemingly done everything in this power to dismantle our capital markets," said Congressman Bill Huizenga (MI-04).  “Americans saving for retirement need less immaterial disclosure regulations that ultimately drive-up costs and reduce returns for everyday investors. The GUARDRAIL Act takes positive and deliberate steps to refocus the SEC on its core mission instead of pushing a political and social agenda."

“The lack of transparency and accountability is putting Americans’ retirement savings at risk,” said Congressman Bryan Steil (WI-01). “Ensuring retirement and pension funds are being managed based on risks and returns, not political agendas is a top priority. We need to empower investors, restore transparency and accountability, and enhance competition.”

“ESG is an evil pollutant that must be eradicated from corporations and businesses,” said Congressman Ralph Norman (SC-05). “Ultimately, the Businesses Over Activists Act would preserve the first amendment rights of corporations and impede economic damages stemming from the misuse of resources delegated to the management of these politized proposals. The SEC should not and does not have the authority to compel companies to include ESG proposals.”

“America’s banking regulators are implementing regulations on climate change in the form of environmental, social, and governance (ESG) policies, but the American people and Congress are being left in the dark as to how these policies are being formulated,” said Congressman Barry Loudermilk (GA-11). “Federal regulators don’t even know who funds the models they use to make these regulations. This is why I have introduced the American Financial Institution Regulatory Sovereignty and Transparency (American FIRST) Act, which will require bank regulators to report the details of their meetings with international organizations and provide Congress with a cost-benefit analysis of any regulation that brings U.S. regulatory policy in line with foreign regulatory policy. I want to thank Reps. Bill Huizenga (R-MI) and Andy Barr (R-KY) for their hard work on this, and Chairman Patrick McHenry (R-NC) for helping get this legislation through the Committee.”

More information regarding the legislation to be considered at this week’s markup can be found below:

H.R. 4790, the Guiding Uniform and Responsible Disclosure Requirements and Information Limits (GUARDRAIL) Act, originally sponsored by Rep. Huizenga

This legislation will bring meaningful changes to SEC disclosure regulations by ensuring companies are only required to disclose material information and requiring the SEC to publicly list and explain any non-material disclosure demands. It also establishes a Public Company Advisory Committee within the SEC to enhance investor protection and market fairness. Lastly, the bill mandates an SEC study to assess the potential impact of the Corporate Sustainability Due Diligence Directive (CSDD) and Corporate Sustainability Reporting Directive (CSRD).

The bill is a compilation of four previously introduced bills, including:

• H.R. 4168, the Mandatory Materiality Requirement Act, originally sponsored by Rep. Huizenga

• H.R. 4628, a bill to amend the Securities Exchange Act of 1934 to require the Securities and Exchange Commission to disclose and report on non-material disclosure mandates, and for other purposes, originally sponsored by Rep. Alex Mooney (WV-02)

• H.R. 4652, the Public Company Advisory Committee Act, originally sponsored by Rep. Frank Lucas (OK-03)

• H.R. 4653, the Protecting U.S. Business Sovereignty Act, originally sponsored by Rep. Dan Meuser (PA-09)

H.R. 4767, the Protecting Americans’ Retirement Savings from Politics Act, sponsored by Rep. Steil

This legislation improves the shareholder proposal and proxy voting process to prioritize corporate growth over partisan political issues. It raises resubmission thresholds for shareholder proposals, invalidates certain SEC regulations and guidance, limits the SEC’s ability to define a “major policy issue,” and allows companies to exclude environmental, social, and political proposals. Additionally, the bill provides transparency and accountability to the proxy advisory industry, prohibits robovoting, and requires proxy advisory firm clients to issue annual public reports on their proxy voting. Finally, the bill requires large asset managers to conduct economic analysis when voting against board recommendations and requires investors to consent to the use of non-pecuniary factors in decision-making.

The bill is a compilation of eleven previously introduced bills, including:

• H.R. 4641, the Performance Over Politics Act, originally sponsored by Rep. Scott Fitzgerald (WI-05)

• H.R. 4644, the No Expensive, Stifling Governance (No ESG) Act, originally sponsored by Rep. Erin Houchin (IN-09)

• H.R. 4640, a bill 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, originally sponsored by Rep. Byron Donalds (FL-19)

• H.R. 4657, a bill to clarify that an issuer may exclude a shareholder proposal pursuant to section 240.14a-8(i) of title 17, Code of Federal Regulations, without regard to whether such proposal relates to a significant social policy issue, originally sponsored by Rep. John Rose (TN-06)

• H.R. 4662, the Corporate Governance Examination Act, originally sponsored by Rep. Ann Wagner (MO-02)

• H.R. 4589, a bill to amend the Securities Exchange Act of 1934 to provide for the registration of proxy advisory firms, and for other purposes, originally sponsored by Rep. Steil

• H.R. 4590, a bill to amend the Securities Exchange Act of 1934 to provide for liability for certain failures to disclose material information in connection with proxy voting advice, and for other purposes, originally sponsored by Rep. Steil

• H.R. 4648, a bill to amend the Securities Exchange Act of 1934 to provide for duties of certain investment advisors, asset managers, and pension funds with respect to voting on shareholder proposals, and for other purposes, originally sponsored by Rep. Loudermilk 

• H.R. 4656, the Protecting Americans’ Savings Act, originally sponsored by Rep. Zach Nunn (IA-03)

• H.R. 4645, the Empowering Shareholders Act, originally sponsored by Rep. Huizenga

• H.R. 4600, the Protecting Retail Investors’ Savings Act, originally sponsored by Rep. Andy Barr (KY-06)

 H.R. 4655, the Businesses Over Activists Act, sponsored by Rep. Norman

This legislation clarifies that the SEC does not have the power to regulate shareholder proposals through Rule 14a-8 and prevents the SEC from forcing companies to include or discuss shareholder proposals. Its goal is to limit the SEC’s control in this area and emphasize the role of state regulations in governing shareholder proposals.

H.R. 4823, the American Financial Institution Regulator Sovereignty and Transparency (American FIRST) Act, sponsored by Rep. Loudermilk

This legislation increases transparency and congressional oversight of federal banking regulators and their interactions with international organizations, particularly non-governmental organizations, to limit their influence on U.S. banking policy. The bill also bolsters the political independence of federal banking regulators by requiring the prudential regulators to report to Congress when implementing non-binding recommendations from Executive Orders or the Financial Stability Oversight Counsel. Finally, the legislation will remove the designation of a member of the Federal Reserve Board as Vice Chairman for Supervision and make conforming amendments in the Federal Reserve Act.

The bill is a compilation of four previously introduced bills, including:

• H.R. 4737, the Stop Executive Capture of Banking Regulators Act, originally sponsored by Rep. Mike Flood (NE-01)

• H.R. 4649, the Ensuring U.S. Authority Over U.S. Banking Regulations Act, originally sponsored by Rep. Loudermilk

• H.R. 4601, the Banking Regulator International Reporting Act, originally sponsored by Rep. Barr

• H.R. 4630, the Supervision Reform Act, originally sponsored by Rep. Andy Ogles (TN-05)

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