A Breath of Fresh Air Amidst “ESG Month”

By Natalia Renta, senior policy counsel for corporate governance and power 

Amidst a whirlwind of anti-ESG activity at the House Financial Services Committee this month, labor leaders and allies reminded Capitol Hill that workers’ hard-earned money is at the center of this controversy. The off-the-record briefing for Hill staff — titled “Protecting Workers’ Retirement Security from Anti-ESG Attacks” — was planned by Americans for Financial Reform and sponsored by the Senate Health, Education, Labor, and Pensions (HELP) Committee.  

Speakers discussed the importance of shareholder engagement for corporate accountability and the need for the Securities and Exchange Commission (SEC) to be allowed to do its job — a critical part of which is equipping investors with more information to make better decisions about their investments.  They also discussed how anti-ESG bills being considered in Congress would insulate the management of public companies from investor input and accountability and undermine regulations that would equip investors with more information to make better decisions about their investments.

Renaye Manley of the Service Employees International Union (SEIU) — who was the first to highlight the fact that those promulgating anti-ESG bills are messing with workers’ money — gave the example of a proposal that shareholders passed at Dollar General calling for an independent worker safety audit.  The company had racked up $21 million in Occupational Safety and Health Administration (OSHA) fines for safety hazards, while also having a high rate of gun-related deaths and injuries.  Renaye also highlighted the importance of racial equity audits as a tool for shareholders to hold companies accountable for the promises they made in the wake of George Floyd’s murder.  She warned that those behind anti-ESG attacks are trying to take away these tools shareholders use to hold companies accountable.

Tejal Patel of the SOC Investment Group explained how shareholder engagement with companies works, including the nuts and bolts of the shareholder proposal process and the role of proxy advisers.  She made the case that a number of the anti-ESG bills under consideration would simply serve to rig the shareholder proposal process in favor of management and against the longer-term interests of workers saving for retirement.

Jonas Kron of Trillium Asset Management explained the role of asset managers in the shareholder engagement process and its relation to value creation.  He made the case for why investors should care about workers’ organizing rights and gave two examples of shareholders successfully engaging with companies on their interference with workers’ organizing rights: Apple, which reached a deal with shareholders to conduct a third-party assessment of its labor practices, and Starbucks, where a majority of shareholders voted in favor of a resolution calling for the same type of assessment.  Both companies have faced scrutiny because of repeated employee complaints about violations of workers’ rights.  

Cambria Allen-Ratzlaff of JUST Capital and the Human Capital Management Coalition spoke about the importance of investor access to consistent, comparable, and decision-useful data about how companies manage their workforce, a central component of long-term value creation.  She emphasized the need for the SEC to promulgate a human capital management disclosure rule that would meet this investor need — a rule that is in the SEC’s regulatory agenda but has yet to be proposed.

Lastly, in prepared remarks read by his colleague due to travel delays, Zeph Capo, the president of the Texas American Federation of Teachers, detailed anti-ESG policies promulgated in Texas, which he described as “an ideological attack on workers’ capital that hurts public employees and puts public pension funds at risk.”  He described the bills introduced in Texas and their detrimental effects on pensioners and Texans more generally, and noted that they are part of a larger state-level strategy by the opposition: there were 59 bills in 30 states specifically targeting public workers’ pensions this year, which is a subset of a broader set of anti-ESG bills.  He urged Congress to protect workers’ money from ideological anti-ESG attacks.

The briefings’ participants and their allies will be keeping a close eye on how members of Congress vote in the upcoming markup and beyond — will they side with workers whose money is on the line or with large public companies looking to insulate themselves from investor input and accountability?

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For more background, read the AFR-led letter for the record prepared ahead of the anti-ESG hearings at the House Financial Services Committee.