On September 7, House Republicans introduced House Bill 2799 (Diamond-R-Lebanon) prohibiting financial institutions from using environmental, social and governance (ESG) scores to help evaluate financial investments (sponsor summary).

An ESG score is a rating that evaluates how sustainably a company is conducting business.

A favorable ESG score could compel investors to invest in a company, either because investors see the company's values as aligned with their own or because investors view the company as sufficiently shielded from future risks associated with issues such as pollution or poor corporate governance.

A less-favorable ESG score may turn an investor who is concerned with ESG away from the company.

House Bill 2799 is part of a national movement by Republicans to prevent financial institutions from securing their investments from the costly risks from climate change, discriminatory practices and poor business ethics.

“Over the past decade, Wall Street has been leveraging the power of transnational corporations to control access to capital through the use of environmental, social, and governance (ESG) scores,” said prime sponsor Rep. Russ Diamond (R-Lebanon).  “Banks, investment firms, and finance institutions have used these scores to determine what businesses qualify for loans and other necessary services like insurance.

“Unfortunately, ESG scores no longer apply just to corporations. Merril Lynch, for one, already applies ESG scores to clients’ investment portfolios.

“Clearly, we’re reaching a point where people with “good” ESG scores may receive lucrative offers, easier loan terms, and even targeted packages designed to reward certain behaviors tied to subjective and ever-changing values and narratives.

“Many who espouse ESG “principles” believe that access to capital is not a right, but a privilege. They contend that financial and business plan metrics should no longer drive investment − instead, their subjective version of “responsible and sustainable” practices should.

“The absurd and anti-American groupthink of global oligarchs and wealthy elites should not determine the purchasing decisions of individuals.

“Using ESG scores to control behavior is only one step away from China’s social credit system, where those who disagree with Communist Party ideology and “values” are punished with throttled Internet speeds, banned from air travel, and denied lodging.

“To protect Pennsylvanians, … the Liberty, Virtue and Independence Act [would]  prohibit any business or corporation doing business in the Commonwealth from using ESG scores as a sole condition of financing or providing services, to prevent ESG scores from being exclusively or primarily used in decision-making in consumer transactions, and to block state Treasury and retirement plans from exclusively utilizing ESG scores when making investment decisions,” said Rep. Diamond.

Rep. Diamond can be contacted by calling 717-277-2102 or by email to: rdiamond@pahousegop.com.

NewsClips:

-- The Hill: Wall Street Hits Back At Republicans In Environmental, Social, Governance (ESG) War

-- NYT: BlackRock Seeks To Defend Its Reputation Over ESG Fight With Republicans

[Posted: September 8, 2022]

9/12/2022