ESG Disclosure Simplification Act of 2021
Floor Speech
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Ms. WATERS. Mr. Speaker, pursuant to House Resolution 473, I call up the bill (H.R. 1187) to provide for disclosure of additional material information about public companies and establish a Sustainable Finance Advisory Committee, and for other purposes, and ask for its immediate consideration in the House.
The Clerk read the title of the bill.
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Ms. WATERS. 1187 and to insert extraneous material thereon.
Mr. Speaker, I rise in support of H.R. 1187, the Corporate Governance Improvement and Investor Protection Act.
H.R. 1187 is a package of bills designed to strengthen investor protections and require companies to provide environmental, social, and governance disclosures, known as ESG. I thank my colleague, Representative Juan Vargas, for his leadership on this package.
This bill provides investors with critical information on ESG matters by requiring public companies to disclose key information to shareholders regarding corporate political spending, worker pay, CEO compensation, climate risk, and country-by-country tax reporting; and provides issuers with clear, consistent standards to disclose this information.
This is key information that investors have been demanding in order to make the best decisions on the short- and long-term viability of the companies they are investing in.
It is surprising that, to this day, there are no explicit ESG requirements and investors are left to piece together the story of a company's material risk with insufficient information. This is unacceptable.
So I am pleased that this package of bills will improve investor protections by holding public companies accountable and providing greater transparency.
This package includes a number of bills authored by several hardworking members of the Financial Services Committee, specifically: Representative Juan Vargas, Representative Bill Foster, Representative Nydia Velazquez, Representative Sean Casten, and Representative Cindy Axne.
Specifically, Mr. Vargas' bill, the ESG Disclosure Simplification Act, requires public companies to disclose certain ESG information to shareholders, as well as the impact of the ESG policies on their strategies.
Mr. Foster's bill, the Shareholder Political Transparency Act, requires public companies to submit quarterly reports to the SEC on any and all political expenditures, including dark money.
Ms. Velazquez's bill, the Greater Accountability in Pay Act, sheds light on pay disparities, helping to close the gender and racial pay gap.
Ms. Axne's bill, the Disclosure of Tax Havens and Offshoring Act, requires disclosures that discourage companies' use of tax havens and encourages repatriation of taxes to the United States.
Mr. Casten's bill, the Climate Risk Disclosure Act, requires disclosures that encourages companies to plan for the impact of climate change on their company.
Each of these bills passed the Financial Services Committee with unanimous Democratic support. I thank all these Members for their work on these bills, their contributions to the legislative package, and their leadership on these important reforms to protect investors and hold corporations accountable.
This package is the right thing to do for investors and our markets. It is past time that Congress make ESG requirements explicit. For these reasons, I urge my colleagues to support the bill.
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Ms. WATERS. Underwood).
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Ms. WATERS. Mr. Speaker, I include in the Record letters from California Public Employees' Retirement System, Public Citizen, the North American Securities Administrators Association, and Principles for Responsible Investment. California Public Employees' Retirement System, Executive Office, June 14, 2021. Subject: H.R. 1187, The Corporate Governance Improvement and Investor Protection Act. Hon. Nancy Pelosi Speaker, House of Representatives, Washington, DC. Hon. Kevin McCarthy, Minority Leader, House of Representatives, Washington, DC
Dear Speaker Pelosi and Minority Leader McCarthy: On behalf of the California Public Employees' Retirement System, I write to express support for the overall direction of H.R. 1187, the ``Corporate Governance Improvement and Investor Protection Act,'' which would require public companies to disclose material information on the link between environmental, social, and governance (ESG) metrics and their long-term business strategy, as well as political expenditures, compensation practices, climate-related risk and tax expenditures, among other issues. This bill will improve and enhance corporate disclosures essential to maintaining the competitiveness of U.S. financial markets.
As the largest public defined benefit pension fund in the United States, we manage approximately $465 billion in global assets on behalf of more than two million members. Our fiduciary duty requires that we take a long-term view in assessing whether the companies that we hold in our portfolio are effectively managed and able to provide the sustainable, risk-adjusted returns that allow us to meet our commitments to pay benefits earned by these dedicated active and retired public servants for decades to come.
We fundamentally depend on the integrity and efficiency of financial markets to meet these commitments and rely upon financial reporting to provide transparent and relevant information about the economic performance, conditions, and operations of the companies in which we invest. We believe corporate disclosure of material financial information is a precondition to maintaining effective and consistent corporate accountability and sustainable economic growth. As the Securities and Exchange Commission (``SEC'') has said in the past:
``Only through the steady flow of timely, comprehensive, and accurate information can people make sound investment decisions. The result of this information flow is a far more active, efficient, and transparent capital market that facilitates the capital formation so important to our nation's economy.''
Critically, CalPERS and other pension funds are inhibited from adequately exercising their fiduciary duty without such disclosures. Disclosure of material financial information is necessary to close the information gap that occurs when management of a company is aware or should be aware of certain risks, yet such information is not available to shareowners. We believe H.R. 1187 will address critical areas in which more high-quality, consistent, and comparable disclosures by public issuers are necessary, and build a more robust reporting regime that enhances shareowner value over the long-term. We are pleased that the following measures, which CalPERS has been on the record in supporting, are included in the Corporate Governance Improvement and Investor Protection Act:
H.R. 1187, the ESG Disclosure Simplification Act, which would, among other things, require issuers to disclose certain ESG metrics to shareholders, the connection between those metrics and the issuer's long-term business strategy, and the method by which the issuer determines how ESG metrics impact its long-term strategy. We believe the current quality and quantity of relevant ESG reporting does not meet investors' needs and support the SEC playing a prominent role in standardizing and assuring the accuracy of ESG data reporting, and that it is reflected in company financials.
H.R. 1087, the Shareholder Political Transparency Act, which would require public companies to disclose detailed information about their political spending to the SEC and shareholders in specified quarterly and annual reports. The CalPERS Governance & Sustainability Principles call for responsible board oversight, including disclosures of corporate charitable and political activity to ensure alignment with business strategy and to protect assets on behalf of shareowners. As fiduciaries, we need to know how our capital is being used, including if and when political expenditures are made. SEC rulemaking would bring clarity and consistency in the format and scope of disclosures and provide a cost-effective alternative to private ordering. Furthermore, political expenditure disclosure is consistent with the SEC's requirement for public companies to disclose meaningful financial information and would encourage prudent use of corporate shareowner resources for political activities.
H.R. 2570, the Climate Risk Disclosure Act, which would require public companies to report financial risks posed to them by climate change, the processes they use to identify those risks, and the actions they take to mitigate those risks. Our investment strategy is to make sure our portfolio is resilient to short-term and long-term risks, both of which include some dimension of climate change. We seek to find the investment opportunities that the energy transition brings, and to bring down emissions that contribute to global warming. We believe it is vital that companies identify, manage, and disclose material environmental risks and opportunities relevant to their short-term and long-term success. We support the establishment of a uniform reporting regime for climate change risk disclosures that would address key issues that impact shareowner value, including minimizing risk, maximizing returns, and ensuring accountability from all those involved.
H.R. 3007, the Disclosure of Tax Havens and Offshoring Act, which would require public companies to annually disclose information on their subsidiaries and specified country-by- country financial information including total pre-tax profits, total amounts paid in State, Federal, and foreign taxes, employees, and tangible assets. As an investor in many of the largest public companies in the world, we are acutely aware of the complexities of international taxes, and the increasingly important role that taxes play in corporate profitability. However, current tax disclosures in the United States do not provide investors with sufficient tax-related information to adequately assess companies' valuations and risks. We believe increasing transparency and requiring the disclosure of overly aggressive international tax planning arrangements helps to reduce systemic risk that threatens global markets and ensure stronger long-term outcomes.
In addition, we are supportive of including additional provisions in the Corporate Governance Improvement and Investor Protection Act, such as the following disclosures related to human capital management, board diversity, and cybersecurity:
H.R. 3471, the Workforce Investment Disclosure Act, which would require public companies to disclose information about their Human Capital Management (HCM) policies, practices, and performance in their annual reports. CalPERS expects fair, accurate, and timely reporting on how companies identify and manage risks related to the three forms of capital: financial, physical, and human. The fact that there are few standards for measuring and reporting on human capital topics makes it difficult for investors to truly understand related risks and opportunities when assessing individual companies. We believe that rules-based disclosures with numeric metrics provide crucial information to long-term investors, like CalPERS, who are concerned about sustainability over time. We have made recommendations in our comment letter on the SEC's proposed rulemaking under Regulation S-K for metrics that should be disclosed by all registrants, including the number of full-time, part-time, and contingent workers; employee turnover rates; health and safety, employee engagement and diversity statistics.
H.R. 1277, the Improving Corporate Governance Through Diversity Act, which would require public companies to annually disclose the voluntary, self-identified racial, ethnic, gender, and veteran status of their board of directors, nominees, and senior executives, and establishes an advisory group to recommend strategies to increase diversity in these leadership positions. We support initiatives that promote talent diversity--including a broad range of education, experience, thoughts, perspectives, and competencies--to help enable effective board leadership. We view board diversity in terms of skill sets, sex, age, nationality, race, sexual orientation, gender identity, disability, and historically underrepresented groups, and believe requiring public companies to annually disclose the self-identified racial, ethnic, gender, and veteran status of their board of directors, nominees, and senior executives is an important step toward challenging ``group think'' in corporate boardrooms and C-suites, which can severely limit companies' ability to innovate and effectively engage with shareowners and other stakeholders.
H.R. __, the Cybersecurity Disclosure Act, which would require companies to disclose in their annual reports to the SEC, or in their annual proxy statements, whether any member of their board of directors, or similar governing body, has expertise or experience in cybersecurity and the nature of such expertise or experience. If there are no members of a company's governing body that have experience or expertise in cybersecurity, it would require the company to describe what other cybersecurity aspects were taken into account by persons responsible for identifying and evaluating nominees for the company's governing body. We believe requiring the disclosure of cybersecurity expertise--or lack thereof--on corporate boards will increase transparency for investors and help to ensure that public companies are appropriately prioritizing cybersecurity and data privacy matters. It represents a reasonable and timely response to the increasing prominence of cybersecurity threats in our financial markets and the broader economy.
In sum, CalPERS believes that clear, consistent, and substantive disclosures of climate risk, charitable and political expenditures, human capital management, and board diversity are critical to the long-term success of capital markets and, more critically, of investors. Disclosures of such information will help investors allocate capital and exercise stewardship at companies to ensure long term sustainable value creation. Such disclosures will also encourage corporations to be more mindful of these risks that could impact their financial success over the long term, and will provide for greater transparency regarding cash flow, corporate expenditures, and public policy engagement.
Thank you for considering our views. We look forward to working with Congress to advance initiatives that will improve corporate disclosures in both the public and private markets. Please do not hesitate to contact me directly, or your staff can contact Danny Brown, Chief of our Legislative Affairs Division, if we can be of any assistance as this measure proceeds. Sincerely, Marcie Frost, Chief Executive Officer. ____ Public Citizen, Washington, D.C., June 14, 2021. Re Public Citizen urges a YES vote on H.R.s 1187, 1087, 1188, 2570, 3007 and amendments. House of Representatives, Washington, DC.
Dear Honorable Representatives, On behalf of more than 500,000 members and supporters of Public Citizen across the country, we ask you to vote yes on a suite of bills designed to improve corporate disclosures regarding climate, compensation, political spending, taxes, human capital and other important issues. These bills were approved by the House Financial Services Committee and arc expected to come before the full House shortly. H.R. 1087, the Shareholder Political Transparency Act (Foster)
This bill requires firms that are traded on public exchanges to disclose in quarterly public reports filed with the Securities and Exchange Commission (SEC) the amount, date, and nature of the company's expenditures for political activities. Importantly, this includes indirect political spending, or money given to trade associations or non-profits that play in politics.
In Citizens United v. the Federal Elections Commission in 2010, the U.S. Supreme Court found that political spending is protected speech and therefore corporations, unions, and other groups are permitted to make unlimited political expenditures, as long as they are not directly given to candidates or parties. The Court assumed, however, that this spending would be disclosed to investors so they could have input. Not addressed by the Court, however, was the fact that shareholders might not be aware of this spending or specific details of where the money might be going. In response, a bipartisan group of securities law experts filed a petition with the SEC to require corporations to disclose their political spending activities, and drew more than 1.2 million comments, the most in SEC history. The SEC has not yet addressed this decade-old petition, and passage of this legislation would jumpstart the rulemaking.
Public Citizen has long championed this important disclosure requirement. Political spending exposes a company to reputational risk when it involves itself controversial issues. Many corporations recognize this problem. For example, a number of companies ceased campaign contributions to certain lawmakers associated with the January 6; 2021 insurrection at the Capitol and in connection to the voter suppression bills moving through statehouses.
While some corporate political spending is already voluntarily disclosed, a considerable amount is funneled through trade associations such as the U.S. Chamber of Commerce, which deploys large numbers of agents to meet with members of Congress. Often, the Chamber advances or promotes policies that an individual company may find uncomfortable were they associated with it openly, such as opposition to climate reform or worker safety measures. If companies' spending on backward issues became known to the public, it could lead to material, reputational harm and ultimately subtract from shareholder value.
Public Citizen heartily endorses this measure.
H.R. 1188, the Greater Accountability in Pay Act (Velazquez)
This bill would require public companies, excluding emerging growth companies, to disclose certain employee pay raise information, comparing the CEO with the median-paid employee at the firm. This measure builds on a reform in the Dodd-Frank Wall Street Reform and Consumer Protection Act that first required identification of the median-paid worker at a firm. This requirement meant that firms were required to add one more item regarding employees to the sole requirement existing, namely, the number of employees.
For a half-century, the fruits of productivity gains have clotted in the C-suite, with average workers receiving little or no increase in real compensation. This has led to income and wealth inequality. During the pandemic, this played out in the need for trillions of dollars in emergency relief, as average people lacked the savings to survive a temporary loss of employment. Disclosures of these pay gaps can help lawmakers devise more ambitious reforms to address the widening gap between those workers who truly drive the economy and elites.
Public Citizen urges you to support this bill. H.R. 2570, the Climate Risk Disclosure Act (Casten) and H.R. 1187, the ESG Disclosure Simplification Act (Vargas)
Both of these bills deal with the increasing demand from investors and the public for information related to environmental, social and governance (ESG) issues. H.R. 2570 would require public companies to disclose in their annual reports information relating to the financial and business risks associated with climate change. The bill also requires the SEC to establish, in consultation with other relevant financial agencies, climate-related risk disclosure metrics and guidance, which will be industry-specific, and will require companies to make both quantitative and qualitative disclosures. H.R. 1187 requires the SEC to define what ESG metrics means and requires firms to disclose those metrics along with how ESG metrics accord with a firm 's long-term strategy. It also requires the SEC to establish a committee that would provide advice to the commission on sustainable finance issues.
Given the physical and transition risks inherent to the ongoing climate crisis and the shift away from fossil fuels and carbon-intensive industry, investors need more information about companies' growing climate financial risk, their contribution to climate change, and their plans for remaining viable in a low-carbon future economy. Requiring the SEC to establish climate-related risk disclosure metrics falls squarely within the agency's mission to protect investors; ensure fair, orderly, and efficient markets; and facilitate capital formation. Indeed, the agency has expressed its intention to explore a climate disclosure rule. Adopting this legislation would explicitly clarify the SEC's authority to adopt such a rule in the face of potential legal challenges from issuers and ideological opponents alike.
At the same time, it is important to remember that climate change is not just an environmental crisis, but one of social justice, wealth distribution, equity and human rights. It is vitally important that disclosures from issuers include elements of environmental and climate justice, as well as other ESG issues like political spending; tax; lobbying; diversity, equity, and inclusion; and human capital management practices to allow investors to make a holistic assessment of an issuer's overall sustainability and make more informed investment decisions.
Despite many firms reporting some ESG data, the available information has not satisfied the needs of investors because it essentially allows firms to self-determine and report which climate risks are material. Many firms provide only vague, boilerplate disclosures or do not address climate risk at all. Management is often overly optimistic about a firm's climate resilience, may not fully understand what investors actually believe is material or want to know, and may have an interest in obscuring parts of the picture, leading to drastic under-reporting of risks. The provisions in this bill represent a major step forward in terms of the quality of information that would be available to investors.
We strongly encourage you to support these bills. H.R. 3007, the Disclosure of Tax Havens and Offshoring Act (Axne)
This bill would require public companies to disclose their total pre-tax profits, and total amounts paid in state, federal, and foreign taxes on a country-by-country basis. The bill would also require companies to disclose a number of specific tax-related items for each of its subsidiaries, as well as on a consolidated basis, such as total accrued tax expenses, stated capital, and total accumulated earnings. This legislation would ensure investors and the public at large are provided with enough information to discern if the companies they are invested in are participating in risky behavior like corporate tax avoidance. Many U.S. multinational companies use accounting maneuvers to book their profits in low- or no-tax jurisdictions, or ``tax havens.'' This legislation to mandate public country-by- country reporting would indeed aim to discourage and curb the trend of corporations' profit shifting to tax havens as these public reports would shed light on corporations that aggressively use avoidance practices to shirk their tax responsibilities, which creates both reputational and financial risk.
We urge you to approve this bill.
We also ask your support for amendments expected to be offered to this suite of bills, including:
H.R. 3471, the Workforce Investment Disclosure Act (Axne): this bill would require the SEC to implement petitioned rulemaking that would require public companies to disclose human capital management policies, practices, and performance. While corporations often claim that employees are their most valuable asset, shareholders know too little about investments in these assets.
H.R. 1277, the Improving Corporate Governance Through Diversity Act (Meeks): This bill would require public companies to annually disclose the voluntarily, self- identified gender, race, ethnicity and veteran status of their board directors. This measure helps corporations better identify how they are promoting diversity in the highest ranks.
H.R. __, the Cybersecurity Disclosure Act (Himes): This bill would require the SEC to issue rules to require companies in their annual reports to the SEC or in their annual proxy statements to disclose whether any member of their board of directors, or similar governing body, has expertise or experience in cybersecurity and the nature of such expertise or experience. If there are no members of a company's governing body that have experience or expertise in cybersecurity, the bill would require the company to describe what other cybersecurity aspects were taken into account by persons responsible for identifying and evaluating nominees for the company's governing body.
With high-level hacks recently grinding important companies to a halt and cybersecurity affecting all walks of life, investors should be aware of how well corporations are prepared to defend themselves against attack.
Public Citizen strongly urges you to vote yes on these important pieces of legislation and amendments to provide greater information to investors, watchdog organizations, and the public at large.
For questions, please contact Bartlett Naylor. Sincerely, Public Citizen. ____ North American Securities Administrators Association, Inc., Washington, DC, June 15, 2021. Re H.R. 1187, the Corporate Governance and Investor Protection Act of 2021. Hon. Nancy Pelosi, Speaker, House of Representatives, Washington, DC. Hon. Kevin McCarthy, Minority Leader, House of Representatives, Washington, DC.
Dear Speaker Pelosi and Leader McCarthy: On behalf of the North American Securities Administrators Association, Inc. (``NASAA''), I am writing to express NASAA's support for several provisions of H.R. 1187, the Corporate Governance and Investor Protection Act, which the House is scheduled to consider this week, as amended and favorably reported by the House Committee on Rules on June 14, 2020. As further detailed below, NASAA also strongly supports two amendments to H.R. 1187 that were made in order by the Committee on Rules. The first such amendment addresses disclosure of information related to the diversity on the boards of directors of U.S. public companies, while the second amendment addresses disclosure of cybersecurity expertise at the leadership level of such companies. I sincerely appreciate your attention to NASAA's views. (1) The ESG Disclosure Simplification Act (Title I)
Increasingly, investors view a company's environmental, social, and governance, or ``ESG'' practices, as a material metric for determining whether to invest. To date, however, there are no uniform standards for the reporting of environmental and certain other ESG factors in the United States. In the absence of such standards, public companies lack clarity when making disclosures relating to ESG considerations. In some cases, they may have incentives to make selective or potentially misleading disclosures about the benefits of their practices, products, or services. Title I of H.R. 1187, the Corporate Governance and Investor Protect Act, seeks to remedy that problem.
The ESG Disclosure Simplification Act, as embodied in Title I, would require public companies to disclose in filings with the U.S. Securities and Exchange Commission (``SEC'') and any proxy or solicitation materials that describe the ``views of the issuer regarding links between ESG metrics and the long- term strategy of the issuer'' and any process the issuer uses to determine the long-term business strategy of the issuer. Further, the bill would express the nonbinding ``Sense of Congress'' that ``environmental, social, and governance [ESG] metrics'' are ``de-facto material'' for the purposes of disclosure under the Securities Exchange Act of 1934. The bill would also create a new permanent ``Sustainable Finance Advisory Committee'' within the SEC, that would, within 18 months of its first meeting, be required to submit ``recommendations about what ESG metrics'' the SEC should require to be disclosed.
The time has come to provide investors seeking to understand factors relating to a company's ESG profile with the ability to accurately understand and weigh ESG risks in their investment decisions, and Congress can play an important role in this regard. NASAA has previously called for Congress to enact legislation that would direct the SEC to develop a uniform standard for ESG reporting by public companies so that investors can understand companies' real practices and impact, and ``make `head-to-head' comparisons between competing investments.'' NASAA has also urged that Congress consider legislation that would direct the SEC to establish a task force to consolidate, to the extent possible, themes from existing reporting frameworks and standards in order to catalyze faster progress toward standardization.'' Title I of H.R. 1187 marks an opportunity to ``move the ball forward'' on both of these recommendations; therefore, NASAA is pleased to support its passage. (2) The Cybersecurity Disclosure Act (Amendment #1)
The Cybersecurity Disclosure Act, as filed as an amendment to H.R. 1187, is identical to stand-alone legislation recently introduced in the Senate as S. 808. NASAA was pleased to support this important legislation at the time of its introduction, and we are pleased to support its inclusion in H.R. 1187.
The Cybersecurity Disclosure Act would require publicly traded companies to include in their annual disclosure filings with the SEC information detailing whether any member of their governing body, such as their board of directors or general partner, possesses expertise or experience in cybersecurity. If no member has such expertise or experience, companies would be required to detail what, if any, other cybersecurity considerations were considered by the persons responsible for identifying and evaluating nominees for the governing body.
For nearly a decade, the list of public companies and financial institutions targeted by organized cyber-attacks has continued to grow with ever-increasing frequency. Over the past year, moreover, this threat has accelerated further due in part to the COVID-19 pandemic. Because many millions of Americans are conducting much or most of their lives online--and because an unprecedented number of U.S. employees arc working remotely--cybercriminals and scammers have an abundance of opportunities to infiltrate business security networks to install malware, steal personally identifiable information (``PII'') of customers and clients, and create other problems.
Incentivizing publicly traded companies to consider whether they have appropriate cybersecurity expertise on their governing body is a common-sense way to promote greater attention to cybersecurity risk by public corporations. Investors and customers are well-served by policies that encourage companies to consider such risks proactively, as opposed to after a data breach has already occurred when investors and customers have already been harmed. Importantly, the Cybersecurity Disclosure Act does not require companies to do anything beyond disclosing information; the bill encourages companies to act in their own best interests by creating an incentive for them to prioritize cybcrsecurity expertise at the senior levels of leadership.
NASAA shares Congress's interest in addressing the threat cybersecurity risk has on public companies and investors. We are pleased to support Amendment #1, and we urge its passage. (3) The Improving Corporate Governance Through Diversity Act (Amendment #11)
The Improving Corporate Governance Through Diversity Act, as filed as an amendment to H.R. 1187, is identical to stand- alone legislation entitled H.R. 1277, the Improving Corporate Governance Through Diversity Act. NASAA was pleased to support H.R. 1277 was it was considered and approved by the House Financial Services Committee in April 2020 and is pleased to again support the bill as an amendment to H.R. 1187.
The Improving Corporate Governance Through Diversity Act would require public companies to disclose annual information on the voluntary self-identified racial, ethnic, gender, and veteran composition of their boards of directors and executive officers. The bill would also require that such companies disclose whether their boards of directors have adopted any ``policy, plan or strategy'' to promote diversity among these bodies, and would instruct the SEC's Office of Minority and Women Inclusion to develop and publish ``best practices,'' in order to help public companies comply with the new diversity reporting requirements. In addition, the Act would establish a new ``Diversity Advisory Group'' within the SEC, which would be exempt from the Federal Advisory Committee Act, and be comprised of representatives from the Federal government, state and local governments, academia, and the private sector. Under the Act, the Advisory Group would be tasked with identifying strategies to ``increase gender, racial and ethnic diversity among members of the board of directors of the issuer,'' and be required to report periodically to Congress and the public.
NASAA has repeatedly called for Congress to examine the current state of corporate board composition with an eye toward encouraging greater diversity. In doing so, NASAA has noted that leading research indicates that greater board diversity correlates with sound corporate governance and enhances the performance of public companies. We have also noted evidence that shows that investors themselves increasingly regard corporate board diversity to be an indication of good governance, which improves both corporate performance and investor relations. Most recently, in NASAA's Legislative Agenda for the 117th Congress, state securities regulators called for Congress to pass legislation ``to require public companies to disclose information that demonstrates the diversity on their boards, or the lack thereof, as well as information regarding the diversity of their corporate operations.''
NASAA congratulates the House for its decision to consider including the Improving Corporate Governance Through Diversity Act as an amendment to H.R. 1187, and we urge its passage.
Thank you for your consideration of NASAA's views. If we may be of further assistance, please do not hesitate to contact me or Michael Canning, NASAA's Director of Policy and Government Affairs. Sincerely, Lisa Hopkins,
NASAA President, General Counsel and Senior Deputy Commissioner of Securities, West Virginia.
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Ms. WATERS. Mr. Speaker, I have no further speakers, and I am prepared to close.
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Ms. WATERS. Madam Speaker, may I inquire as to how much time is remaining.
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Ms. WATERS. Madam Speaker, I yield myself the balance of my time.
Madam Speaker, this bill provides urgently needed investor protections by requiring the Securities and Exchange Commission to adopt clear, consistent standards for ESG metrics. Without the information requirements in this bill, investors are left with inconsistent information across companies and are ultimately unable to fully assess their investment decisions.
Investors deserve to know the risks they are exposed to with relation to climate change, political expenditures, and other important factors. We must make this right and take action to bring accountability to public companies.
Some or all of the provisions of this package have been supported by Public Citizen, AFL-CIO, SEIU, California Public Employees' Retirement System, Americans for Financial Reform, Council of Institutional Investors, United Nations Principles for Responsible Investment, Americans for Tax Fairness, North American Securities Administrators Association, FACT Coalition, Oxfam America, Ceres, and Sierra Club, among others.
For years, investors and market participants have been demanding more and better disclosures regarding ESG matters, which research shows can have significant impacts on the short- and long-term values of companies.
For example, a report issued by the BlackRock Investment Institute found that companies that score high on ESG measures are better able to adapt to environmental and societal changes, use resources more efficiently, have more productive employees, and tend to face lower risk of reputational damage and regulatory action.
Matters related to climate risk, the ways companies invest in their workers and further diversity, spend their cash on political expenditures, their global human rights records, their tax avoidance strategies, and how they invest in crucial corporate infrastructure such as cybersecurity are all significant and material factors in companies' short- and long-term viability.
Investors, who are the true owners of our Nation's public companies, recognize the importance of this information to their decisionmaking and have been demanding this information for years.
For example, in 2018, a coalition of public pension funds asset managers and others representing over $5 trillion in assets petitioned the SEC for rulemaking on mandatory ESG disclosures. Over 2,300 investment managers, asset managers, and service providers representing over $80 trillion in assets under management have become signatories to the United Nations Principles for Responsible Investment, which commits to incorporating ESG factors into their investment decisions.
A group of 35 institutional investors representing over $6.6 trillion in assets form the Human Capital Management Coalition has petitioned the SEC to adopt rules to require issuers to disclose information related to their human capital management policies, practices, and performance.
When the SEC solicited comments on political spending disclosures in 2011, it received over one million comments; by far more comments than any other SEC rulemaking petition, and the vast majority of which were overwhelmingly favorable. Yet the SEC's efforts were stymied because the Senate minority leader has personally insisted on statutorily prohibiting the SEC from even studying the issue.
However, we are currently without clear, consistent standards for this information to be disclosed. Investors will continue to be left in the dark. It is time we give investors and markets the information they have been demanding for so long.
And let me be absolutely clear about who we are fighting for. The other side has taken up the issue, as it tends to want to protect these big public corporations from disclosures.
It is for the American workers, the retirees, who worked their whole lives to save for retirement, for the public pension funds investing on behalf of our Nation's teachers and our firefighters, and other frontliners. We are fighting to ensure they have been given the tools they need to protect what they have worked so hard for, to achieve the American Dream.
So I would urge all of my colleagues who are concerned about not only the retail investors, but concerned about the institutional investors who are responsible for these teachers and these firefighters and these others that I have alluded to, and their ability to feel safe and comfortable that decisions are being made that are in the best interest of the people who are invested in them.
So I would ask for an ``aye'' vote on this very, very comprehensive and serious legislation.
Madam Speaker, I yield back the balance of my time.
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Ms. WATERS. Madam Speaker, I claim time in opposition to the amendment.
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Ms. WATERS. Madam Speaker, I strongly oppose Mr. Burgess' amendment. This amendment is interesting to me because Republicans have, without fail, consistently cited the materiality standard both here on the House floor and in the Financial Services Committee as a basis to oppose very important disclosures.
Republicans have argued over and over again that we do not need to enact any new disclosures because companies are already required to disclose any and all material information. But, with this amendment, it seems their purported commitment to materiality has gone out the window so that they can bring attention to their massive tax cuts for the rich.
In 2018, when the United States Government should have been focused on growing the real economy for American workers, the former President pushed forward the largest tax giveaway to our country's largest corporations and executives in history. This government handout provided corporations and executives with $2 trillion in tax cuts and giveaways, saddling the United States Government with debt.
Make no mistake, these tax cuts did not go primarily to workers, but, instead, they went overwhelmingly to the top 1 percent. The year after the Trump tax cuts were implemented, public companies spent nearly $1 trillion in stock buybacks, rather than investing in research and development, increasing worker wages, or shoring up their bottom lines to make sure they could weather times of crisis.
According to the Center on Budget and Policy Priorities, Trump's tax plan gave the top 400 highest income taxpayers an additional $15 million per year. Compare this to the $2.8 million the average college graduate will earn in their lifetime.
This amendment absolutely and completely ignores the harm done to hardworking Americans and focuses on alleged harm to the large corporations. This amendment suggests our Nation's largest companies should not be paying their fair share, while American workers are forced to pay for Republicans' corporate handouts.
Madam Speaker, I urge my colleagues to reject this amendment, and I reserve the balance of my time.
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Ms. WATERS. Madam Speaker, I yield myself the balance of my time.
Mr. Burgess' amendment is a gimmick intended to distract from the important goals of this package. It insinuates that corporations should not be paying their fair share, while hardworking taxpayers foot the bill. So I urge my colleagues to join me in rejecting Mr. Burgess' amendment.
Madam Speaker, I yield back the balance of my time.
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Ms. WATERS. Madam Speaker, pursuant to section 4 of House Resolution 473, I offer amendments en bloc.
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Ms. WATERS. Madam Speaker, I rise in support of the amendments en bloc, and I yield myself such time as I may consume.
Madam Speaker, I rise in strong support of this en bloc package of Democratic amendments to H.R. 1187, the Corporate Governance Improvement and Investor Protection Act.
These amendments include critical provisions offered by my colleagues, Representative Himes, Representative Axne, Representative Phillips, Representative Wexton, Representative Frankel, and Representative Meeks.
These provisions strengthen H.R. 1187 by requiring public companies to disclose key information related to cybersecurity, corporate board diversity, human rights abuses, human capital management, and the ways companies are investing in and protecting their workforce.
Investors, the true owners of public companies, need this information because of the significant effects they can have on the bottom lines and operations of the companies they are investing their hard-earned money in. Investors need this information to hold companies accountable.
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Ms. WATERS. Madam Speaker, I yield 1 minute to the gentlewoman from Iowa (Mrs. Axne).
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Ms. WATERS. Madam Speaker, I yield 1 minute to the gentleman from New York (Mr. Meeks).
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Ms. WATERS. Madam Speaker, I yield an additional 30 seconds to the gentleman from New York.
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Ms. WATERS. Madam Speaker, I yield 1 minute to the gentlewoman from Florida (Ms. Lois Frankel).
Ms. LOIS FRANKEL of Florida. Madam Speaker, I thank Representative Waters for her leadership on this issue.
Madam Speaker, I want to highlight some language in this en bloc amendment that is very important to the working women of this country. The provision requires publicly traded companies to disclose the number and monetary amounts of settlements and judgments in connection with workplace harassment claims.
This will not only improve transparency and accountability for public companies, but it will provide incentives for them to foster respectful, safe workplaces free from harassment and to make sure that there are consequences when workplace abuses occur.
Here is the thing. Up to 80 percent of women have experienced some form of workplace harassment, and there are serious implications that often result: physical and mental health problems, career interruptions, and lower earnings. Enduring this kind of harassment at work can even discourage women from advancing their careers, which only makes the gender wage gap worse.
All persons must have safe workplaces to reach their full potential, and investors should know more about the workplaces they are putting their money behind. Transparency should add motivation to employers to keep their employees safe, and that is good for everyone.
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Ms. WATERS. Madam Speaker, I yield myself the balance of my time to close.
I urge my colleagues to join me in standing up for our Nation's investors and workers to vote ``yes'' for these Democratic amendments.
I do believe that Mr. Huizenga correctly described who they are working for. He just talked about how big these corporations are and how much they have to manage.
Of course, prior to him, Mr. Burgess talked about, yes, the tax breaks that they receive, and they should receive more tax breaks. However, they are worried about these corporations and their ability to comply, despite the fact they have all of the accountants they need, they have all of the personnel they need, they have all of the management they need. They have everything that they need to be in compliance.
We are simply saying it is time for them to disclose information that the investors have been asking and begging for.
And, of course, they often refer to the retail investors. But the institutional investors must be included in this decision because they are the ones that are in control of the teachers and the firefighters and the workers on the front lines and all of that money that they are investing for them, and they have got to protect them. The way that you protect them is making sure that the investors understand how to make good decisions based on information.
If the big corporations, with all that they have to be able to operate, do not give them this information, do not have this information, do not share this information, they are at a great disadvantage.
And so I would simply ask my colleagues to understand whose side we are on. We are on the side of the retail investors and the institutional investors who are handling all of the money of our frontline workers who are investing for their retirement.
I would ask for a ``yea'' vote on these en bloc amendments.
Madam Speaker, I yield back the balance of my time.
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Ms. WATERS. Madam Speaker, on that I demand the yeas and nays.
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Ms. WATERS. Mr. Speaker, I claim time in opposition.
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Ms. WATERS. Mr. Speaker, I strongly oppose the amendment offered by Mr. Hill. This amendment would gut the entirety of H.R. 1187. Bizarrely, this amendment offered by my colleague has an odd focus on climate change, suggesting that we need more study about the financial risk of climate change. Let me be very clear: climate change is real. We cannot alter the Earth's orbit or the Moon's orbit or click our heels three times and wish for climate change to magically disappear.
In fact, the impacts of climate change are already apparent and are affecting global financial markets. Unfortunately, studies show that market prices currently fail to factor in the risks of climate change to the tune of trillions of dollars.
Mr. Hill's amendment would also allow companies to continue to engage in legally risky tax-avoidance schemes to funnel limitless amounts of corporate dark money into politics and to enrich CEOs while worker wages remain stagnant. This is precisely the information that investors want to know about the companies that they own.
I urge my colleagues to reject this amendment. I reserve the balance of my time.
Mr. Hill's amendment would completely gut H.R. 1187 and would prevent investors from accessing critical environmental, social, and governance information that they need to make the best investment decisions possible and hold the companies they own accountable.
I urge my colleagues to vote ``no'' on Mr. Hill's amendment, and I yield back the balance of my time.
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Ms. WATERS. Mr. Speaker, this amendment offered by Representative Schrier requires the SEC to work with the Office of the Advocate for Small Business Capital Formation and the Office of the Investor Advocate to study the issues smaller public companies may face in reporting ESG disclosures, and to make recommendations for the SEC to consider.
Disclosures of ESG-related matters are critical to investors in markets, and it is imperative that public companies provide investors, the true owners of these companies, with this important information. However, it is just as important for us to ensure that public companies of all sizes are able to comply with these disclosure requirements.
To address this, my colleague, Representative Schrier, has introduced an amendment that requires the SEC to work with the Office of the Advocate for Small Business Capital Formation and the Office of the Investor Advocate to study the issues that smaller public companies face in disclosing ESG matters, and to make recommendations for the SEC to tailor these disclosure requirements to assist smaller public companies.
Ms. Schrier's amendment, along with Mr. Vargas' provision in H.R. 1187, will help smaller public companies by ensuring that the SEC is factoring in the unique issues that smaller public companies face while also creating clear, consistent regulatory standards that reduce regulatory uncertainty, all while providing investors and markets with this critical information.
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Ms. WATERS. Mr. Speaker, on that I demand the yeas and nays. The SPEAKER pro tempore. Pursuant to section 3(s) of House Resolution 8, the yeas and nays are ordered.
Pursuant to clause 8 of rule XX, further proceedings on this question are postponed. Amendment No. 10 Offered by Ms. Plaskett.
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Ms. WATERS. Mr. Speaker, I understand that my friend and colleague, Ms. Plaskett, has raised some concerns about the treatment of territories in this bill, and I want to assure her that the staff has done everything possible in the bill text to ensure that territories are included in this bill and not treated disparately.
The language in this bill is consistent with regulations promulgated under the Obama administration regarding country-by-country tax reporting, which were carefully written to ensure territories were not excluded.
I want to make clear that nothing in this bill should be intended to suggest that territories are tax havens. In fact, I have worked with my colleague, Mr. San Nicolas, on this bill text. We believe that the enhanced disclosures in this bill, which will include territories, should help encourage investment in the territories and hold corporations accountable for lack of investment in territories.
I want to ensure Ms. Plaskett that I take her concerns seriously, and I intend to work with her to make sure that what she is identifying as perhaps incorrectly being defined as tax havens is an issue that I will deal with.
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