Protecting Investor Interests: Examining Environmental and Social Policy in... (EventID=116194)

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Connect with the House Financial Services Committee Get the latest news: https://democrats-financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Wednesday, July 12, 2023, at 10:00 a.m. (ET) full Committee Chairman McHenry and Ranking Member Waters will host a hearing entitled, “Protecting Investor Interests: Examining Environmental and Social Policy in Financial Regulation." ___________________________________ Witnesses for this one-panel hearing will be: • James Copland, Senior Fellow & Director, Manhattan Institute • Benjamin Zycher, Senior Fellow, American Enterprise Institute • Lawrence Cunningham, Special Counsel, Mayer Brown • Ted Allen, Vice President, Society for Corporate Governance ___________________________________ Background The federal government’s focus on costly non-material environmental, social, and political issues at the expense of sound financial regulation has troubling consequences. This approach significantly drives up the costs and burdens associated with participating in the U.S. public markets, leading to decreased attractiveness for private companies considering going public or remaining public. Additionally, these increased costs hinder the ability of American public companies to compete on a global scale. Ultimately, these non-core regulations impact retail investors who rely on solid financial returns for their retirement savings. The resulting scenario not only discourages private companies from entering the public market but also places undue strain on existing public companies and the investors who depend on them. One area that requires greater transparency and accountability is the proxy process, which no longer promotes long-term shareholder value efficiently and effectively. Currently, untethered shareholder activism diverts attention and resources from core issues, thereby undermining the attractiveness of U.S. markets and deterring companies from going public. The Securities and Exchange Commission (SEC) has exacerbated this problem by promulgating changes that facilitate the inclusion of politically motivated shareholder proposals in annual proxy statements and reversing important reforms to proxy solicitation rules. This shift in focus towards advancing environmental, social, and political policies detracts from the primary purpose of public markets—to enable companies to raise capital and foster economic growth. Furthermore, the federal government’s imposition of climate reporting and other requirements diverts corporate resources away from growth and competitiveness. For instance, the SEC has proposed a 500-page climate disclosure rule that would replace voluntary sustainability reports with mandatory disclosures, including detailed emissions data and climate risk management strategies. These additional reporting obligations place an unnecessary burden on companies, distracting them from their core objectives and hindering their ability to grow and compete in a global economy. Regulators overseeing depository institutions are also adopting climate-related financial risk measures. Banking regulators have issued draft principles and sought input on managing climate risks. Such actions politicize regulatory agencies, as they may be influenced by external organizations advocating for climate policies based on highly questionable financial risk scenarios. Such politicization threatens the independence of regulators, including the Federal Reserve, and risks blurring the line between their regulatory duties and political agendas. Legislative Proposals • H.R. ____, to authorize the exclusion of shareholder proposals from proxy or consent solicitation material if such proposals are substantially similar to previously included proposals. • H.R. ____, to authorize the exclusion of shareholder proposals from proxy or consent solicitation material if such proposals substantially implement, substantially duplicate, or are substantially similar to previously included proposals. • H.R. ____, to authorize the exclusion of shareholder proposals from proxy or consent solicitation material if the subject matter of the shareholder proposal is environmental, social, or political. • H.R. ____, to clarify that an issuer may exclude a shareholder proposal pursuant to section 240.14a-8(i) of title 17, Code of Federal Regulations, without regard to whether such proposal relates to a significant social policy issue. • H.R. ____, to amend the Securities Exchange Act of 1934 to prohibit the Securities and Exchange Commission from compelling the discussion of shareholder proposals or proxy or consent solicitation materials. • H.R. ____, to require the Securities and Exchange Commission to conduct a study of certain issues with respect to shareholder... Hearing page: https://democrats-financialservices.house.gov/events/eventsingle.aspx?EventID=410595