Proposed ESG reporting rule in GOP crosshairs

Republican lawmakers are targeting a proposed Security and Exchange Commission (SEC) rule requiring public companies to enhance their reporting of “ESG” information related to the environment, social impact and corporate governance. 

Rep. John Rose (R-Tenn.) said at “Principled Profit: The Hill’s ESG Summit” on Wednesday that he expects GOP lawmakers to fight to overturn the agency’s rules if the party takes control of the chamber in the midterms, as it is expected to do. 

The proposed changes would require companies to report more information about the non-financial impact of their operations, with proponents arguing investors deserve to have as much information as possible about how issues like climate change could affect a company’s future.

But Rose and a bipartisan group of 117 lawmakers, mostly Republicans, sent a letter to SEC Chair Gary Gensler last month saying the new rules would place too great a regulatory burden on farmers to report the required data, potentially squashing small farms and worsening supply chain issues.

“I think it will have a deterrent effect on the supply of food and ultimately it will have a negative impact on the price,” Rose told The Hill’s Sylvan Lane at Wednesday’s event, sponsored by Schneider Electric.

The rule proposals come as the SEC has started to crack down on a practice called greenwashing, which is when fund managers use misleading information to attract investment from ESG funds. 

ESG investing is the increasingly popular inclination of investors to make capital decisions based not only on likely financial return, but also with an eye on the company’s impact on the environment, wider society and its own employees. 

Rep. Andy Levin (D-Mich.) said investing in ESG funds is becoming more important because of the “five-alarm emergency” that climate change poses to the planet.

“We want plans to offer ESG options, we want there to be clarity about some guardrails so we can’t have this greenwashing, we can’t have these phony claims,” Levin said at the event. “I’m glad the SEC is stepping up … but I think Congress should also act.”

The SEC has extended the public comment period on its proposed reporting rules through mid-June.