WASHINGTON, DC – Today, Congressman Dave Joyce (OH-14) introduced a resolution responding to recently proposed environmental, social, and governance (“ESG”) disclosures rules. Joining Congressman Joyce as original cosponsors are Rep. Bryan Steil (WI-1), Rep. Dusty Johnson (SD-At-large), Rep. Jeff Duncan (SC-3), Rep. Chris Stewart (UT-2), and Rep. Glenn Grothman (WI-6). The resolution aims to protect American industry from federal government overreach by affirming Congressional support for the existing definition of “materiality” for the purpose of corporate disclosures and opposes new disclosure requirements that go beyond the Securities and Exchange Commission’s (SEC) core mission.
“The SEC was not established to micromanage the operations of U.S. companies based on social and political goals,” said Joyce. “I’m proud to introduce this resolution to denounce the weaponization of our securities laws and support the longstanding principles which guide the SEC’s disclosure regime. Adherence to the materiality standard has allowed our capital markets to flourish while ensuring investors have what they need to make informed decisions. I urge my colleagues to join me in this effort to prevent the SEC from straying outside of its core mission for political purposes.”
“The Biden SEC continues to abuse its power to push social policy through our securities laws, rather than focusing on its core responsibility to protect investors and support robust capital markets,” said Rep. Steil. “Our tried-and-true materiality definition ensures investors get the information they need to make informed decisions. We need to stop the SEC from overturning this bedrock corporate governance principle to push costly and misguided ESG rules that will hurt American families’ retirement savings and damage our economy.”
“The Biden Administration’s SEC rule on ESG is another overreach of the Executive Branch to achieve its Green New Deal agenda,” said Johnson. “There are limited circumstances when ESG information is material to a company, and any disclosure requirement beyond that has gone too far, plain and simple. The SEC should stick to its mission and avoid these activism tactics.”
The SEC is tasked with regulating America’s financial sector, and its rules require companies to disclose “material” risks, as established by the Securities Act of 1933 and clarified several times by the Supreme Court. The Biden Administration SEC intends to expand the range of information that must be disclosed beyond that which is material to investors to include topics related to climate, diversity, and corporate governance, often called “ESG” factors.
Securities laws already require public companies to disclose information that represents a “material risk” to the company, including climate-related risks. Consequently, any new information that the Biden Administration wishes to have disclosed by companies is not material and will only serve to burden businesses and drown investors in a mountain of information overload.
One target of these proposed rules is the energy industry, which will be required to make a variety of additional disclosures. These additional requirements send the signal from the SEC that these are disfavored companies. Dependence on foreign energy is a recipe for disaster, as we can see today in Europe. American energy companies have made – and continue to make – great strides toward sustainability, without adding anything for investors focused on risk.