On Tuesday the U.S. House of Representatives held their second hearing to advance attacks on America’s free market under the guise of “anti-ESG.” Before the hearing, For the Long Term released a memo on the harm of anti-ESG laws for retirees, taxpayers, investors, businesses, and communities, and the anti-free market, shortsighted ideology behind the movement.
The hearing, which quickly revealed itself to be a charade, doubled down on asinine conspiracy theories and an array of nonsensical arguments in an effort to revive failing efforts to advance anti-free market legislation in the states. The majority witnesses’ testimony, alongside the questions and statements made by House Republican members, exposed how and why the entire anti-free market movement is failing.
3 Takeaways From the Second Anti-ESG Congressional Hearing
1. Unserious Arguments Driven by Unserious People:
Comparing credentials and credibility of the majority and minority witnesses illustrates the lack of seriousness behind this issue. None of the majority witnesses are economists or have financial services or investing credentials, or expertise. All also have ties to organizations behind model legislation to restrict investment decisions and are funded by fossil fuels, which is behind a coordinated attack against ESG investment strategies.
The minority witness, Shivaram Rajgopal, holds a Ph.D. in Accounting from the University of Iowa, a Chartered Accountancy certification, and a Bachelor of Commerce degree from India. Rajgopal serves as the Kester and Byrnes Professor of Accounting at Columbia Business School, worked at Citibank N.A., and served on the faculty of Emory University, University of Washington, and Duke University.
Like the first hearing, arguments from the majority members and witnesses against ESG investment principles were laden with conspiracy theories, such as how ESG is a ploy to “rewrite the fabric of America with…woke policies that deliver…cultural oppression,” “advance a leftist political agenda,” “defund politically disfavored” companies, to “defund the police,” and promote “gender transitions in children.”
They also discussed how ESG is a “barrier to upward [economic] mobility” and “makes the realization of the American dream contingent on acquiesce to the demands of the woke left.” Additionally, they claimed that ESG is a way to discriminate against people with conservative beliefs, an argument proven to be created by the fossil fuel industry.
Mandy Gunasekara, a majority witness, was pressed on her argument that ESG is used to promote “gender transitions in children” by U.S. Representative Becca Balint, who asked, “Do you really believe that garbage?” Gunasekara replied “It’s not about believing, it’s a matter of fact.”
But while espousing nonsensical conspiracy theories, majority members and witnesses couldn’t agree on the driver of the “ESG agenda.” From President Joe Biden and “Leftist Elites” and “Financial Elites,” to China and Europe (apparently, the entire continent) —ESG is supposedly a worldwide conspiracy being coordinated by a vast network of global power players.
But despite their belief that ESG investing is a dangerous conspiracy, majority witnesses and members made it clear that they are actually “fine with ESG” and not “demonizing” it, and that if companies want to consider ESG factors, they should be able to.
2. The Anti-Free Market Movement Ignores Reality and Common Sense:
Majority members and witnesses brought up, several times, how ESG investment principles risk returns for Americans’ retirement accounts, but they carefully avoided any questions or discussion about how their movement’s anti-free market laws have been shown to shift costs to taxpayers and reduce pension returns for retirees.
U.S. Representative Cori Bush noted how after Texas passed anti-ESG laws, taxpayers there were on the hook for an additional $300 to $530 million in interest in the first eight months after the laws took effect. U.S. Representative Jamie Raskin also discussed how anti-ESG laws across the country were raising costs on states, adding millions more in interest on borrowing costs.
While taking questions from Rep. Bush, Shivaram Rajgopal, the minority witness, explained that ESG risk information should be thought of as leading indicators of what’s to come in the future, as it pertains to a company’s cash flow.
U.S. Representative Shontel Brown asked Rajgopal how and why investment managers consider ESG risk factors when making investment decisions. Rajgopal explained, “as a fiduciary, if there’s a robust body of science that raises potential risks, let’s say climate for example, at the very least I think it’s your responsibility to look at those things…You want to look at specific aspects of the E and the S and the G…that to me, is a way to think about the investments you have and look at the mosaic of factors.”
Rep. Brown continued, asking whether Rajgopal thought the banning of ESG data is politically motivated, he replied: “I think it’s regrettable. We should just let the free market decide what it wants to. Markets can’t be efficient if you stop access to data.”
U.S. Representative Katie Porter asked Rajgopal why majority members and witnesses didn’t want companies or investment managers to consider ESG information, he replied, “if there are signals that inform your view of future cash flows and risks, as a fiduciary, you are actually failing your responsibility if you don’t look at those signals.” Rep. Porter continued, asking Rajgopal if limiting pension fund managers' investing options would increase retirement savings, to which he responded, “Not that I can think of.” Rep. Porter responded that the Kansas Division of Budget conducted a study and found that limiting pension fund managers’ investment options would cost the retirement system $3.6 billion in reduced returns.
3. The Anti-Free Market Effort is Failing:
As the hearing went on, it became clear that the majority members and witnesses preferred to discuss conspiracy theories and ridiculous claims to substantive details and the facts around considerations of risk information in investing. U.S. Representative Katie Porter embodied the minority members’ waning patience when she stated, “What is the point of this hearing? … Part one was actually the stupidest hearing I’ve ever been to and now we’re having a part two. Please, God, let there not be a part three.”
The hearing, which was supposed to be focused on access to risk information for investing, ended up promoting ideas such as risk information really being a secret, worldwide conspiracy to discriminate against “white people,” push “gender transitions in children,” and deliver “cultural oppression,” among a myriad of other conspiracy theories.
Coming on the heels of faltering efforts in states to impose anti-free market laws that restrict investment freedom and access to risk information, and failures among the efforts of far-right interest groups to create a “parallel economy” catering to voters that share their ideology, the disaster of a hearing proved to be a striking embodiment of the entire movement to take down “woke capitalism.”