ESG Disclosure Simplification Act of 2021
Floor Speech
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Mr. BARR. Mr. Speaker, I thank my friend from Michigan.
Mr. Speaker, I rise today in opposition to H.R. 1187, with all due respect to my good friends from California and Illinois. We have enjoyed a robust discussion and debate on this, which I would argue is a very important topic.
Mr. Speaker, the statutory mission of the Securities and Exchange Commission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. Its mission, though, is not to reduce carbon emissions. Its mission is not to solve climate change.
Now, those may be laudable public policy objectives, but they are best handled by the Congress or other Federal agencies. This is simply not the job of the SEC.
This bill is, unfortunately, the next episode in the Democrats' saga to weaponize financial regulation to achieve partisan social and environmental goals. Congressional Democrats and the Biden administration know that they cannot pass the Green New Deal and other extreme far-left policy priorities through a Democrat-majority Congress, so they are corrupting an independent Federal financial regulator to do their bidding.
The majority claims that this bill is an effort to improve corporate governance when, in reality, it is a thinly veiled attempt to open a back door to achieve their socialist wish list and cut off financing to legal but politically unfashionable industries that they despise.
The result will be higher energy costs for the American people, a regressive energy tax on the people in this country who can the least afford it.
As always, the Democrats think that the government knows best and is better equipped than the private market to meet demand. They give no consideration to the impacts of significant cost increases, the bill's effect on retail investors, or the actual utility of the information they are requesting and its materiality for informing investment decisions.
My friend from Arkansas (Mr. Hill) made this point. But the seminal Supreme Court case that defines the materiality standard was TSC Industries v. Northway. In that majority opinion, Justice Thurgood Marshall wrote, and it bears repeating: ``If the standard of materiality is unnecessarily low, not only may the corporation and its management be subjected to liability for insignificant omissions or misstatements, but also management's fear of exposing itself to substantial liability may cause it simply to bury the shareholders in an avalanche of trivial information, a result that is hardly conducive to informed decisionmaking.''
So, this is not about investor protection. This is about weaponizing Federal securities law to discriminate against law-abiding American energy companies. This is an effort to pick winners and losers in the marketplace by the government. It is an effort for central planning of our economy. It is not about markets. This is about market distortion by the Federal Government.
In committee, I tried to make a commonsense change to ensure the bill covers only material information so that investors aren't buried by that avalanche. The majority rejected my amendment. This shows they are more interested in naming and shaming companies than providing useful information to investors.
Mr. Speaker, my last point is this: the job of the SEC is to protect investors, but this bill would compromise investor returns by elevating nonpecuniary factors above and ahead of financial performance.
How do we know this? Because fees of ESG funds are 43 percent higher than non-ESG funds. And many low-ranked ESG stocks not only outperformed top-ranked ESG stocks, they outperformed the market overall.
We must not harm American investors. We must not harm American retirement savers by subordinating investor returns to promote nonpecuniary policy objectives like social justice, diversity quotas, and lower carbon emissions.
Financial regulations should not be a tool for social change.
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Mr. BARR. Mr. Speaker, I thank the gentleman for yielding.
Mr. Speaker, once again, the bill we have been considering today is puzzling for Republicans, as it probably is for a large number of my Democratic friends as well.
On the one hand, the far left seeks to blame so much of what is bad in the world on large public companies. But then they turn around and claim that these same companies will see the light and embrace extreme leftwing policies if only they disclose more of their activities in obscure SEC reports. Mind you, these are perfectly legal activities, too.
But no serious Member of the House can believe the world works like this. The far left wants to claim they are heroes using the Securities and Exchange Commission to fight the scourges of our time, from foreign dictatorships to environmental degradation. But in reality, they are weaponizing financial regulation, and their support for this bill comes in the form of empty political rhetoric masquerading as sound corporate governance. Make no mistake, Mr. Speaker, this bill is about politicizing securities regulation.
Far from this fantasy land live the majority of House Members who understand that there are actual urgent problems we can solve only if we work together to address them.
Perhaps the gravest of these problems is represented by the goals of the Chinese Communist Party, which is perpetrating the great crime of our age against the Uighurs and other minorities in China. Beijing is also working to stamp out the vibrant democratic culture in Hong Kong, hoping all the while that Congress will look the other way.
If we are truly concerned by public companies that may be working with bad actors--particularly bad actors responsible for China's worst human rights abuses--then burying their names on the SEC's website will achieve absolutely nothing. We need to ensure that they are referred to the Treasury Department so that we can impose sanctions, and that is what my motion to recommit will do.
Under this MTR, instead of reporting on malign Chinese companies to the SEC--an agency that has long acknowledged its lack of expertise and, frankly, its lack of capability and interest in pursuing foreign policy goals--we will instead make sure that entities in corporate supply chains are flagged for the Treasury when public companies have reason to believe they are involved in atrocities in Xinjiang, from mass surveillance to forced labor and other violations of basic human rights.
Companies will also be able to sound the alarm on entities complicit in China's assault on Hong Kong's freedoms, allowing OFAC at the Treasury to determine whether it can impose new sanctions.
We must cut off offenders from the global economy until China changes course. We must rely on appeals to their bottom line and not their conscience. That is the power of U.S. sanctions.
Mr. Speaker, if we adopt the motion to recommit, we will instruct the Committee on Financial Services to consider my amendment to H.R. 1178. My amendment doesn't pretend we can fight genocide, authoritarianism, mass detentions, mass surveillance, and other human rights violations with meaningless rhetoric on corporate transparency, none of which keeps China's leaders up at night.
There are over 1 million Uighurs detained in China and over 100 facilities covering millions of square feet suspected as sites of forced labor. It is an insult to Beijing's victims to claim that disclosure tweaks from the SEC will stop this. Securities regulation will not stop this.
Mr. Speaker, we can either pass half measures that we know won't work and then wring our hands later when the problem remains unresolved, or we can articulate what we want to target and take real action. The former is beneath the dignity of this House.
Measly disclosures in securities filings, transforming 10-Ks from 100 pages to thousands of pages, that is not going to solve the problem. The former is beneath the dignity of the House. The latter is embodied in my amendment: sanctions, OFAC using the power of the U.S. Department of the Treasury.
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