ESG investing and ESG-related issues have become a flash point for Republicans over the past couple of years. Following the elections, the GOP now controls the House of Representatives, and the Senate will at least remain at 50-50 (with Vice President Kamala Harris being the tie breaking vote), but the Democratic majority could expand to 51-49 if Senator Warnock (D-GA) wins the special election on December 6th. This means we know that RILA members will see ESG topics addressed in congressional hearings and legislation in the House. In the past, the ESG investments portfolio would have fallen under the Financial Services Committee which has oversight of the SEC, but under the new majority, RILA members should expect to see multiple congressional committees having a seat at the table in addition to having leadership increase oversight.
As we have seen at the state level with specific actions against some of the largest asset managing companies and Wall Street banks, there is a strong likelihood that House will develop legislation to prevent the actions of these companies from directly impacting certain business operations. There could also be efforts to limit the scope on shareholder activism and addressing proxy advisors.
RILA members should also expect several congressional committees to conduct robust oversight and investigation efforts of the SEC on issues related to climate change and human capital, as well as actions at the Environmental Protection Agency. Expect Republicans to undergo legislative efforts to undue specific provisions in the Inflation Reduction Act (IRA) throughout the 118th Congress. These repeal attempts could potentially reach President Biden’s desk for his signature, even if it is highly unlikely he will sign. Even with Republicans controlling the House there are very few legislative tools to actually stop a rulemaking from moving forward, so lawsuits will have more potential to curtail the actions and reach of the SEC and other departments and agencies once rules are finalized.
The Biden-Harris Administration strongly believes in advancing union protections but with a Republican majority in the House, there is almost no chance of the resurrection of legislation along the lines of the Protecting the Right to Organize Act (PRO Act). Republicans will prioritize competing legislation such as the Employee Rights Act, conduct oversight hearings, and offer legislation to combat the National Labor Relations Board (NLRB) and Department of Labor (DOL). This divided scenario will put more emphasis on administrative oversight from the White House, prioritizing holding employers liable for potential violations of worker safety, worker classification, and wage theft.
RILA members should also be prepared for the new House majority to continue to highlight connections to China and how those partnerships appear to run counter to their public commitments around ESG. Republicans could potentially use the newly created Select Committee on China to highlight some of these discrepancies as well as within other House committees.
Want to unpack the ESG national and state election implications further? RILA will be hosting a Post-Election ESG Implications Webinar, February 15 at 2pm ET. Please reach out to VP of CSR Erin Hiatt for registration information.
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