House GOP focuses on banks and their regulators amid anti-ESG push

Rep. Andy Barr, R-Ky., complained during a House Financial Services Committee hearing on Tuesday that “regulators have started inserting climate policies into bank regulation and supervision.”

Bloomberg News

WASHINGTON — House Republicans have criticized the Federal Reserve’s climate scenario analysis, as well as other efforts by Biden administration regulators to help banks and their customers understand climate risk.

Meanwhile, other House Republican-led efforts have targeted the banks themselves, as some big banks as asset managers, and how they make ESG investment decisions. Both movements are part of a broader Republican anti-ESG blitz, which last month included hearings and oversight of proxy voting companies.

During a hearing with witnesses that included top executives from the Fed, Federal Deposit Insurance Corp and Office of the Comptroller of the Currency, Republicans introduced three bills that would require bank agencies to report various banking activities. policy-making in Congress, and one that would strip the Fed’s top banking regulator, the post of vice president for oversight, currently held by Michael Barr.

“Following the administration’s stance on climate-related financial risks, regulators have begun to insert climate policies into banking regulation and supervision,” said Rep. Andy Barr, R-Ky., chairman of the sub -Committee on Financial Institutions and Monetary Policy. “There is little transparency about the climate efforts of regulators and what is happening in administration-led climate task forces or international global governance organizations.”

These bills have little hope of making it to President Joe Biden’s desk, but are important messaging tools ahead of the 2024 presidential election, and could be a signal of what the party hopes to accomplish depending on the results. of this election and the rhetoric. could inform policy at the state and local levels.

At the hearing, Republicans sought to distinguish between the decisions of private banks and the actions of regulators, though Democrats criticized the hearing and the House backlash against ESG as politicizing efforts by regulators. banks and regulators to manage climate risk.

“There’s nothing wrong with regulators wanting to know more about data, methods and analysis or asking banks about what they’re doing,” Rep. Barr said. “No one believes that financial institutions should ignore risks that are not fully understood. But we and regulators know that institutions are already analyzing climate-related financial risks, and many large institutions have publicly available information outlining how they monitor and manage this risk.

Michael Gibson, director of oversight and regulation at the Fed, defended the Fed’s decision to collect data from the largest financial institutions on their climate exposure.

“While there is considerable uncertainty about the timing and magnitude of the impact of climate change in different institutions with different risk profiles, it is prudent to build capacity to better understand the range of risks” , Gibson said. “Big banks, for example, are increasingly focusing on the risks and opportunities that climate change brings, and supervisors need to understand that.”

At the same time, House Financial Services Oversight and Investigations Subcommittee Chairman Bill Huizenga, R-Mich., pressed some banks directly on ESG issues. While the banking industry as a whole has not been at the center of the Republican backlash against ESG, some institutions have found themselves questioning lawmakers based on their asset management business.

Huizenga’s letters were sent to BlackRock, Vanguard, State Street, JP Morgan Chase, T. Rowe Price, Prudential, Goldman Sachs, Fidelity, Capital Group Companies and the Bank of New York Mellon.

“The lack of transparency surrounding the decisions asset managers make on behalf of millions of retail investors is concerning,” he said. “Companies that leverage their voting power to strategically vote on shareholder proposals in an effort to drive social and environmental policy change are deviating from the primary goal of maximizing returns for investors. Congress needs to understand how asset managers discharge their fiduciary responsibilities to prioritize financial returns and act accordingly in the best interests of the shareholder.”