House Democrats call for repeal of Trump administration’s ESG rule – Ballotpedia News


ESG developments this week

In Washington, DC

House Democrats call for repeal of Trump administration’s ESG rule

On July 29, 13 Democratic deputies from the House of Representatives sent a open letter to Labor Secretary Marty Walsh asking him to push further the actions of the Ministry of Labor on ESG investments.

Trump’s Department of Labor enacted a rule late last year that directed pension fund managers to assess investments governed by the Employees’ Retirement Income Security Act (ERISA) using only pecuniary factors. While the rule does not exclude ESG investments entirely, its aim was to make their inclusion in retirement investment funds much more complicated than it would otherwise have been and therefore much less likely.

Upon taking office, President Biden called for this rule to be reviewed by Labor, and on March 10, the Labor Department’s Employment Benefits Security Administration announced that until further notice order, the Trump administration rule would not be enforced.

In their letter of July 29, the deputiesincluding Andy Levin (MI) and Suzan DelBene (WA), who presented legislation on this subjectasked Secretary Walsh to take the next step:

“While ending this rule is a necessary first step, we believe it is just that – a first step. A new rule is essential to remove the aforementioned deterrent effect and allow plan trustees to integrate ESG factors into their investment strategies without fear of legal consequences.

ESG investing is growing at a breakneck pace. In 2020 alone, $ 51.1 billion in net investment was invested in sustainable funds, nearly double the previous annual record. We believe this is proof of the desire of workers to ensure that their retirement investments reflect their values. This commitment is supported by evidence which shows that investments that take ESG principles into account have generally performed well, or even better, than comparable conventional investments. Workers do not have to compromise between getting a return on their investments and their principles, and the rules and regulations governing pension plan investments should not force them to do so. Instead, these rules should provide clarity so that sustainable investing is not a burden. “

The members haven’t asked Walsh for a specific answer or a date they would like to hear from him, only that they look forward to working with him on the matter.

Who wants more disclosure?

In an article from July 28 On the Cato Institute’s website, Jennifer Schulp, director of financial regulatory studies, made an argument previously made by SEC Commissioner Hester Peirce about investors’ alleged demand for new mandatory ESG disclosures from the share of listed companies. While Peirce recently distinguished between investors and activists, Schulp articulates the potential differences between professional investors and individual investors, between Wall Street and Main Street:

“[T]the current interest in ESG is undeniable.

Those who want SOEs to be required to disclose ESG information see this investing behavior as a sign that the “crowd” is okay with it. During his confirmation hearing, SEC Chairman Gary Gensler cited the “tens of billions of dollars in assets” as evidence that investors “really want to see” the climate risk disclosure, which is part of the ” E ”from“ ESG ”. SEC Commissioners Lee and Crenshaw also both pointed out that investor demand supports the SEC’s efforts to enforce ESG-related disclosure. But do we understand this “investor demand?”

[T]The common refrain that “investors demand ESG information” does not specify who these investors are. Investors, of course, are not a monolith, but conclusions drawn from empirical research in space often treat them as such. This research tends to ignore individual investors and focuses on professional investors, many of whom offer ESG-related products themselves. This research has also been carried out extensively by organizations, such as Blackrock, Ernst & Young, and Natixis, which are themselves interested in promoting ESG.

The focus on investment professionals is certainly justified as they are an important group to understand. Many of these professionals make decisions that affect individual investors through mutual funds, ETFs, or direct retirement asset management. But even when fiduciary duties are supposed to ensure that these professionals act in the best interests of their clients, Wall Street and Main Street don’t necessarily agree. While surveys generally show the interest of professional investors in ESG, few have asked questions about individual investors. Those who have found that individual investors show only some interest in ESG investing, which largely disappears under economic stress, and individual investors generally view ESG information as irrelevant when making decisions investment. It is therefore an exaggeration to say that investor interest in ESG issues applies uniformly to different types of investors.

On Wall Street and in the private sector

Investors get creative

According to MBH Company, a UK-based financial services company, investors are so engrossed in the desire to find good small businesses with strong ESG credentials that they’re willing to look almost anywhere and accept almost any positive data as proof of a company’s credentials:

“A lack of publicly available information on companies’ ESG credentials prompts investors to turn to overlooked sources for data acquisition, new research shared exclusively with City AM reveals.

Figures from MBH Corporation show that 89 percent of UK-based professional investors believe employee satisfaction platforms will provide crucial information on the validity of companies’ adherence to good environmental and governance initiatives.

MBH Corporation said investors scoured employee reviews posted on sites such as Glassdoor and Vault for ESG information to assess whether to invest in a company….

Vikki Sylvester, Managing Director of Acacia Training and Executive Director of MBH Corporation, said…

“Investors are so hungry for information and will check relevant websites for clear information about companies. “

In the spotlight

The governance of Ben and Jerry

According to Effi Benmelech, a finance professor at the Kellogg School of Management at Northwestern University, the recent decision by ice cream company Ben and Jerry’s to end its license with its current Israeli subsidiary has left its parent company, Unilever, in dire straits. difficult, a situation that could end is expensive:

“In the United States, 33 states have passed laws that restrict government investments or contracts in companies that boycott Israel; if Unilever does not act to reverse the board’s decision, it could face divestment and losses.

When founders Bennet Cohen and Jerry Greenfield (aka “Ben and Jerry”) sold the company to Unilever in 2000, the acquisition agreement established a unique governance structure that retained the independent board of directors. company, responsible for protecting the company’s brand and pursuing ESG efforts. And in their opinion, the board is acting exactly as expected. As they wrote in a recent Op-Ed, “[W]e support unequivocally the decision of the company to cease its activities in the occupied territories… If we no longer have any operational control over the company which we founded in 1978, we are proud of its actions and believe that it is on the right side of the story. “”

As Professor Benmelech notes, Ben and Jerry’s is, in its own words, a practitioner of “G-less ESG”. Benmelech concludes that in its opinion, the only solution for Unilever is to end the special conditions of Ben and Jerry’s and impose a “G” on its subsidiary, whether it likes it or not.

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