[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                 BUILDING A SUSTAINABLE AND COMPETITIVE
                  ECONOMY: AN EXAMINATION OF PROPOSALS
                   TO IMPROVE ENVIRONMENTAL, SOCIAL,
                       AND GOVERNANCE DISCLOSURES

=======================================================================

                                HEARING

                               BEFORE THE

                  SUBCOMMITTEE ON INVESTOR PROTECTION,

                 ENTREPRENEURSHIP, AND CAPITAL MARKETS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 10, 2019

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-39
                           
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


                               __________
                                

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
39-739 PDF                  WASHINGTON : 2020                     
          
--------------------------------------------------------------------------------------


                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             PETER T. KING, New York
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                ANDY BARR, Kentucky
JOYCE BEATTY, Ohio                   SCOTT TIPTON, Colorado
DENNY HECK, Washington               ROGER WILLIAMS, Texas
JUAN VARGAS, California              FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey          TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
AL LAWSON, Florida                   BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan              WARREN DAVIDSON, Ohio
KATIE PORTER, California             TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah                    JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York   BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia            LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
        Subcommittee on Investor Protection, Entrepreneurship, 
                          and Capital Markets

                CAROLYN B. MALONEY, New York, Chairwoman

BRAD SHERMAN, California             BILL HUIZENGA, Michigan, Ranking 
DAVID SCOTT, Georgia                     Member
JIM A. HIMES, Connecticut            PETER T. KING, New York
BILL FOSTER, Illinois                SEAN P. DUFFY, Wisconsin
GREGORY W. MEEKS, New York           STEVE STIVERS, Ohio
JUAN VARGAS, California              ANN WAGNER, Missouri
JOSH GOTTHEIMER. New Jersey          FRENCH HILL, Arkansas
VICENTE GONZALEZ, Texas              TOM EMMER, Minnesota
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
KATIE PORTER, California             WARREN DAVIDSON, Ohio
CINDY AXNE, Iowa                     TREY HOLLINGSWORTH, Indiana, Vice 
SEAN CASTEN, Illinois                    Ranking Member
ALEXANDRIA OCASIO-CORTEZ, New York
                           
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    July 10, 2019................................................     1
Appendix:
    July 10, 2019................................................    39

                               WITNESSES
                        Wednesday, July 10, 2019

Andrus, James, Investment Manager-Financial Markets, Sustainable 
  Investment, CalPERS Investment Office..........................     7
Atkins, Hon. Paul S., Chief Executive Officer, Patomak Global 
  Partners.......................................................     8
Lubber, Mindy S., President and Chief Executive Officer, Ceres...    11
Mohin, Tim, Chief Executive, Global Reporting Initiative (GRI)...     5
Wright, Degas A., CFA, Chief Executive Officer, Decatur Capital 
  Management, Inc................................................    10

                                APPENDIX

Prepared statements:
    Andrus, James................................................    53
    Atkins, Hon. Paul S..........................................    40
    Lubber, Mindy S..............................................    61
    Mohin, Tim...................................................    77
    Wright, Degas A..............................................    84

              Additional Material Submitted for the Record

Maloney, Hon. Carolyn:
    Written statement of the Council of Institutional Investors..    90
    Written statement of the FACT Coalition......................    97
    Written statement of the International Corporate 
      Accountability Roundtable (ICAR)...........................    99
    Written statement of Morningstar.............................   161
    Written statement of Public Citizen..........................   166
    Written statement of the Sustainability Accounting Standards 
      Board (SASB)...............................................   170
    Written statement of the Teachers Insurance and Annuity 
      Association of America (TIAA)..............................   174
    Written statement of the Forum for Sustainable and 
      Responsible Investment (US SIF)............................   175
    Written statement of various undersigned organizations.......   180
    Petition from Cynthia Williams, Osler Chair in Business Law..   182
Huizenga, Hon. Bill:
    CalPERS press release........................................   202
    Institute for Pension Fund Integrity report entitled, ``ESG 
      Investing for Public Pensions: Does It Add Financial 
      Value?''...................................................   205
    MarketWatch editorial........................................   215
    Pacific Research Institute report entitled, ``Environmental, 
      Social, and Governance (ESG) Investing: An Evaluation of 
      the Evidence,'' dated May 2019.............................   217
    Editorial from The Wall Street Journal.......................   244
Lubber, Mindy S.:
    Written responses to questions for the record from Chairwoman 
      Maloney....................................................   249
Mohin, Tim:
    Written responses to questions for the record from Chairwoman 
      Maloney....................................................   259
Wright, Degas A.:
    Written responses to questions for the record from Chairwoman 
      Maloney....................................................   265
    Written responses to questions for the record from 
      Representative Himes.......................................   268

 
                       BUILDING A SUSTAINABLE AND
                        COMPETITIVE ECONOMY: AN
                      EXAMINATION OF PROPOSALS TO
                     IMPROVE ENVIRONMENTAL, SOCIAL,
                       AND GOVERNANCE DISCLOSURES

                              ----------                              


                        Wednesday, July 10, 2019

             U.S. House of Representatives,
               Subcommittee on Investor Protection,
             Entrepreneurship, and Capital Markets,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:06 p.m., in 
room 2128, Rayburn House Office Building, Hon. Carolyn Maloney 
[chairwoman of the subcommittee] presiding.
    Members present: Representatives Maloney, Scott, Foster, 
Vargas, Gottheimer, Gonzalez of Texas, Porter, Axne, Casten; 
Huizenga, Duffy, Stivers, Wagner, Hill, Emmer, Mooney, and 
Davidson.
    E officio present: Representatives Waters and McHenry.
    Chairwoman Maloney. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time. Also, without 
objection, members of the full Financial Services Committee who 
are not members of the subcommittee are authorized to 
participate in today's hearing.
    Today's hearing is entitled, ``Building a Sustainable and 
Competitive Economy: An Examination of Proposals to Improve 
Environmental, Social, and Governance Disclosures.''
    I now recognize myself for 3 minutes for an opening 
statement..
    This hearing will address one of the most important topics 
in the markets right now: environmental, social, and 
governance, or ESG, disclosures. This includes environmental 
issues such as climate change, social issues such as human 
rights, and governance issues such as political spending by 
public companies.
    Investors overwhelmingly want companies to disclose ESG 
information, especially because there is now considerable 
evidence that companies that perform better on ESG metrics also 
perform better financially. In fact, over 2,300 investment 
managers around the world who collectively invest over $80 
trillion have formally committed to incorporating ESG factors 
into their investment decisions by signing on to the U.N.-
sponsored Principles for Responsible Investing.
    As a result of this investor demand, many companies already 
disclose at least some ESG information. This is a positive 
development, but I firmly believe that more must be done.
    The ESG disclosures that companies currently make often 
aren't as detailed as they should be and are difficult to 
compare across companies because they are not often 
standardized. I believe the best way to improve the quality and 
consistencies of these disclosures is for the SEC to establish 
standards for ESG disclosure that would apply to all public 
companies in the United States.
    Other Federal agencies have already organized--recognized 
the importance of improved ESG disclosures. Just today, 
Commissioner Ros Behnam at the CFTC announced the creation of a 
climate-related market risk advisory committee that will 
examine best practices for disclosing climate-related risks in 
the derivatives market. And I applaud Commissioner Behnam for 
taking action on this important issue.
    But now it is time for the SEC to act also. Several of the 
bills we are considering today would require the SEC to 
establish standards for ESG disclosures. For instance, Mr. 
Vargas has a bill that would require public companies to 
disclose certain ESG metrics, which the SEC would be required 
to establish. To help the SEC in this task, the bill would also 
create a sustainable finance advisory committee which would 
advise the SEC on which ESG metrics companies should have to 
disclose.
    In addition, the Shareholder Protection Act would require 
public companies to disclose their political spending, which 
has been a longstanding priority for Democrats on this 
committee.
    Before I close, I want to say one thing about the idea that 
the SEC shouldn't mandate ESG disclosures, because companies 
should only be required to disclose information that is 
material.
    First of all, that has never been true. The SEC mandates 
disclosure of lots of specific information that is not tied to 
the concept of materiality. And second, this relies largely on 
the SEC staff to know what information is material to each 
individual company and then to bring enforcement actions 
against those companies. But the SEC staff is in no position to 
second-guess companies about what is material to their specific 
businesses. And the SEC staff has to rely on the information 
the companies provide them in the first place. So materiality 
alone is not sufficient. We have to do more.
    I look forward to hearing from our witnesses on all of the 
bills today.
    And with that, the Chair now recognizes the ranking member 
of the subcommittee, Mr. Huizenga, for 5 minutes for an opening 
statement.
    Mr. Huizenga. Thank you, Madam Chairwoman.
    Today's hearing entitled, ``Building a Sustainable and 
Competitive Economy,'' will examine these legislative proposals 
regarding environmental, social, and corporate governance 
provisions.
    What exactly are these ESGs? And many claim that ESG 
investing is an investment strategy that focuses on 
incorporating ESG criterion to investment decisions in addition 
to the more commonly accepted focus on investments expected 
financial returns. However, ESG data and criteria span a range 
of issues, including among others, attempts to measure a 
company's carbon emissions, labor policies, human right 
policies, whether the company engages in, ``harmful 
activities'' such as gun manufacturing or sales or cigarette 
manufacturers, the structures of corporate governance, for 
instance, whether the CEO and the chairman of the board of 
directors are the same person or whether a company issues dual 
class shares.
    Before a December meeting of the SEC Investor Advisory 
Committee, SEC Commissioner Hester Peirce opined that the 
acronym ESG actually stands for enabling shareholder graft. 
Additionally, in a 2019 speech in June, she likened the ESG 
disclosures to that of scarlet letters being pinned on 
corporations without worrying about facts or circumstances. She 
went on to say that for some, ``naming and shaming corporate 
villains is fun, trendy, and profitable.''
    It is clear that demands for ESG information have 
increased, and many companies have responded by voluntarily 
increasing the amount of ESG information they disclose. But 
let's be clear, companies should focus on providing meaningful 
material disclosure that a reasonable investor needs to make 
informed decisions with.
    I can assure you that if they are seeing what has been 
claimed that companies that do that do ``better'', then they 
will do it. Best practices will bubble up to the top and they 
will be adapted. And, frankly, they should not be forced to be 
done under the penalty of law.
    After all, companies and boards that are best equipped to 
determine what ESG factors they believe are material to their 
individual business in order to create an optimized value for 
their shareholders and potential investors. What should not 
happen is that the government mandate these disclosures. 
Mandatory ESG disclosures only name and shame companies, as 
well as waste precious company resources that could otherwise 
be used to create jobs, increase wages, grow the company, 
expand capacity, maximize shareholder value.
    And any politically motivated action disguised as a 
disclosure mandate will just add yet another hurdle to an even 
greater cost of going public, which will only discourage more 
companies for doing so. And as we have talked about in this 
committee a number of times, we have seen a plunge in these 
initial public offerings, these IPOs. And instead, we should be 
looking at ways to lower the cost and reduce barriers on those 
seeking to become the next Amazon, Microsoft, Starbucks, 
Google, and the list goes on and on.
    Over the last decades, activist, shareholders, and 
corporate gadflies have, frankly, hijacked the SEC and operate 
well outside its mandate and push nonmaterial social and 
political policies. The SEC should be focused on its current 
mandates of protecting investors; maintaining fair, orderly, 
and efficient markets; and to facilitate capital formation.
    I continue to emphasize that mandating these disclosures is 
only doing more harm than good. As the U.S. IPO market steadily 
decreases at an alarming rate, the regulatory compliance costs 
for businesses continues to grow exponentially. It should be 
shocking to everyone that countries like China are producing 
over one-third of all of the IPOs that the world is seeing 
these days. ESGs do not help produce or launch more IPOs. And 
what is being proposed here today stands to reduce an already 
low number even further.
    We as lawmakers should be working to create an atmosphere 
that helps promote more capital formation, strengthen job 
creation, and increase economic growth, not harm it.
    With that, my time has expired, and I yield back.
    Chairwoman Maloney. Thank you so much.
    The Chair now recognizes the gentleman from California, Mr. 
Vargas, for 2 minutes.
    Mr. Vargas. Thank you very much, Madam Chairwoman. And 
thank you for yielding and for including my draft legislation, 
the ESG Disclosure Simplification Act, in this hearing.
    I believe this hearing is timely. Environmental, social, 
and governance matters are growing concern and interest to the 
investment community. Investors increasingly view ESG 
disclosures as crucial tools and material information for 
evaluating a company's financial performance. Research has 
shown that companies that account for ESG factors tend to 
perform better with more stable returns.
    This is not about name and shame; this is about protecting 
investors and our economy and our environment. The use of ESG 
information by investors wouldn't have been possible without 
the pioneering leadership of organizations like the Global 
Reporting Initiative, GRI, which is represented here today. And 
I see Mr. Mohin. Thank you very much for being here.
    As many of you are aware, last fall, a coalition of asset 
managers, nonprofit organizations, public pensions funds, and 
law professors filed a petition with the SEC for a rulemaking 
on ESG disclosure. That petition was the impetus for my draft 
legislation, which I hope will serve as a starting point for a 
larger conversation on ESG disclosures.
    I look forward to hearing from the witnesses.
    And I have to say also, it is becoming more and more clear 
to my friends on the other side that climate change is real. It 
is not a Chinese hoax. It is something that is impacting all of 
us, all of our communities, here in Washington, D.C., certainly 
in California and throughout the world. And that is why I think 
it is important for this information to be readily available 
and to be standardized.
    So, again, I thank those who have pioneered in this field.
    And again, Madam Chairwoman, I thank you for the 
opportunity of presenting, and I yield back the balance of my 
time.
    Chairwoman Maloney. Thank you very much.
    The Chair now recognizes the ranking member of the full 
Financial Services Committee, Mr. McHenry, for 1 minute.
    Mr. McHenry. I thank the Chair, and I also thank the 
ranking member.
    Congress needs to be helping everyday investors. That is 
our clear motivation. And the best way to help them is by 
making our public markets healthier and more competitive. 
Stronger U.S. capital markets will encourage growth, which will 
lead to more investment opportunities and choices for everyday 
investors to grow their savings. These are good things. 
Unfortunately, compared to 20 years ago, families have roughly 
half the number of publicly listed companies to choose from 
when considering investment opportunities for their savings. 
That is a problem.
    I am concerned that this hearing yet again misses the mark 
by ignoring these really important trends. Instead, at this 
hearing, we are going to be discussing costly proposals that 
increase barriers to capital formation, discourage companies 
from joining or remaining in public markets. And these things 
hurt everyday mainstream investors and their investment 
opportunities. So it is time we consider and focus on serious 
policies to reduce barriers for companies and investors and 
make our markets much more competitive and, again, the envy of 
the world.
    Chairwoman Maloney. Thank you.
    Today, we welcome testimony from a distinguished panel of 
witnesses. First, we have Tim Mohin, who is the chief executive 
for the Global Reporting Initiative. Second, we have James 
Andrus, who is an investment manager focusing on sustainable 
investments for the California Public Employees' Retirement 
System, or CalPERS. Next, we have Paul Atkins, who is the CE0 
of Patomak Global Partners and who was formally a Commissioner 
at the SEC. Next, we have Degas Wright, who is the CEO of 
Decatur Capital Management in Decatur, Georgia. And last but 
not least, we have Mindy Lubber, who is president and CEO of 
Ceres, a sustainability nonprofit in Boston, Massachusetts.
    Witnesses are reminded that your oral testimony will be 
limited to 5 minutes. And without objection, your written 
statements will be made a part of the record.
    Mr. Mohin, you are now recognized for 5 minutes to give an 
oral presentation of your testimony.

   STATEMENT OF TIM MOHIN, CHIEF EXECUTIVE, GLOBAL REPORTING 
                        INITIATIVE (GRI)

    Mr. Mohin. Thank you, Madam Chairwoman. And I thank the 
subcommittee for inviting me to testify at today's hearing.
    My name is Tim Mohin. I am chief executive of the Global 
Reporting Initiative, GRI. We are the largest standard setter 
for environmental, social, and governance, the so-called ESG 
information. Prior to GRI, I have held senior roles at three 
different major American companies. I also have experience in 
both the Executive and Legislative Branches of the U.S. Federal 
Government. So I speak to you today, not just as the head of 
the world's largest ESG standard setter, but as an individual 
who understands the complexities and pressures faced by 
American companies and also the importance of strong Federal 
policy.
    Today, I will focus my remarks on the ESG Disclosure and 
Simplification Act. GRI welcomes this legislation. It will 
strengthen ESG reporting by companies and it will protect 
investors. And specifically, the bill will level the playing 
field for both companies and investors.
    It relies on international standards. And by doing so, it 
will not increase reporting burden, because the vast majority 
of companies are already reporting and they are already 
reporting to the GRI standards. And it will protect investors 
by creating essential clear and comparable data.
    Let me just share some brief background on GRI to explain 
why we support this legislation. We were established in the 
United States by Ceres, who is represented on the panel today, 
and we became an independent organization in 1997, over 20 
years ago. Our success over 20 years is really based on the old 
axiom that you manage what you measure.
    All organizations, including the ones I previously worked 
for, run on data. And by identifying, measuring, and most 
importantly, reporting ESG topics, you tend to improve 
performance on these topics. This is not just some theory. I 
have seen this firsthand in the companies that I have worked 
for. Two of my former employees, Intel and AMD, have actually 
been reporting ESG information for over 20 years.
    For these leaders, it is not just about accountability with 
investors outside the company. This information is a very 
important decision tool inside the company.
    We created the GRI standards to provide the tools needed 
for companies to collect and report ESG information. But over 
the years, we have continuously improved these tools. Perhaps 
the most significant change we have made in the last few years 
was to completely revamp our governance model, to become the 
world's only independent, international multistakeholder 
standard setter for ESG information. And we did that by 
modeling our governance model on the same governance that the 
financial standard setters have. And largely as a result of 
this process, we are now the most adopted ESG standard by both 
companies and policymakers.
    Today, more than 90 percent of the largest 250 companies on 
the planet are reporting ESG information, and 75 percent of 
those are using the GRI standards. Here in the U.S., the number 
is about 600 companies using the GRI standards and about 80 
percent of the Dow Jones Industrial Average.
    Globally, the market for this information is exploding. We 
had some information last year that the assets being managed 
with some form of ESG information are now over 30 trillion U.S. 
dollars, and that is larger than the GDP of the United States. 
And it has grown by 34 percent in the last 2 years.
    It is growing because investors know that so-called 
nonfinancial information can have significant financial impacts 
over the longer term. And policymakers around the world have 
not missed this trend. They are following this trend. We are 
tracking right now 139 policies in 61 countries that 
specifically reference or require the GRI standards. Sixty of 
those policies in 45 countries are capital market regulations.
    So just like financial disclosure, it is essential that 
this committee and policymakers around the world focus on a 
single global standard, because we need a common global 
language if we are going to unlock free trade and capital flows 
that increasingly depend on this information.
    So in conclusion, I want to applaud the committee for the 
ESG Disclosure and Simplification Act. It will protect 
investors, it will help unlock free trade, and ultimately, it 
will help align capital to sustainable business practices.
    Thank you for this opportunity to testify today.
    [The prepared statement of Mr. Mohin can be found on page 
77 of the appendix.]
    Chairwoman Maloney. Thank you.
    Mr. Andrus, you are recognized now for 5 minutes for your 
testimony.

    STATEMENT OF JAMES ANDRUS, INVESTMENT MANAGER-FINANCIAL 
   MARKETS, SUSTAINABLE INVESTMENT, CALPERS INVESTMENT OFFICE

    Mr. Andrus. Chairwoman Maloney, Ranking Member Huizenga, 
and members of the subcommittee, on behalf of the California 
Public Employees' Retirement System, a reasonable investor, I 
thank you for the opportunity to testify.
    My name is James Andrus, and I am an investment manager for 
sustainable investments for CalPERS. I applaud and support the 
subcommittee's focus on building a sustainable and competitive 
economy.
    CalPERS benefits from a system that ensures accountable and 
transparent corporate governance with the objective of 
achieving the best returns in value over the long term. I will 
provide an overview of CalPERS and review various legislative 
proposals under consideration.
    CalPERS is the largest public pension fund in the United 
States, with approximately $370 billion in global assets. The 
CalPERS Board of Administration developed governance and 
sustainability principles. These principles guide the internal 
and external managers of CalPERS when making investment 
decisions and provide the framework by which we execute our 
shareowner proxy voting responsibilities and exchange portfolio 
companies to achieve long-term returns.
    Our Board of Administration also adopted a 5-year ESG 
strategic plan in 2016. My testimony is primarily based on the 
principles in ESG's strategic plan.
    CalPERS strongly believes that all investors, whether large 
institutions or private individuals, should have access to 
disclosures that allow them to make informed investment 
decisions. We believe that enhanced data and transparency 
requirements will promote more efficient and sustainable 
financial markets over the long term.
    There are many substantive areas about which long-term 
investors could use more information. For example, as a member 
of the Human Capital Management Coalition, we joined others to 
file a petition with the SEC focused on human capital 
disclosures.
    I am now pleased to discuss, in broad terms, CalPERS' views 
on the bills before us today. I am proud to say that CalPERS 
supports the direction of each one.
    First, our principles call for robust board oversight and 
disclosure of corporate charitable and political activity to 
ensure alignment with business strategy and to protect assets 
on behalf of shareowners. We have consistently been in favor of 
such enhanced disclosure, and therefore, support the 
Shareholders Protection Act. Notably, in the majority opinion 
of the court in Citizens United, former Justice Anthony Kennedy 
wrote that with the advent of the internet, prompt disclosure 
of expenditures can provide shareholders and citizens with the 
information needed to hold corporations and elected officials 
accountable for their positions and supporters. The First 
Amendment protects political speech. And disclosure permits 
citizens and shareholders to react to the speech of corporate 
entities in a proper way.
    CalPERS agrees with Justice Kennedy on the material value 
of disclosure in this area, and urge Congress, the FEC--or the 
SEC to implement these important measures.
    Next, climate risk disclosure. Detailed corporate 
disclosures regarding the impact of climate change on 
corporations' long-term performance are essential. 
Comprehensive disclosure of risk factors related to climate 
change should clearly reveal how companies identify and manage 
such risks to generate sustainable economic returns. The 
Climate Risk Disclosure Act does this.
    Next, ESG disclosure simplification. Consistent with 
CalPERS' strategic plan, the ESG Disclosure Simplification Act 
would require companies to make new and more robust ESG 
disclosures. This legislation would establish an inclusive 
process for advancing important proposals aligned with 
integrated reporting. Accordingly, CalPERS supports the 
approach.
    Fourth, corporate human rights. Our principles are clear 
with regard to human rights. Corporations should adopt maximum 
progressive practices toward the elimination of human rights 
violations in all countries or environments in which the 
company operates. In line with our principles, we advocate for 
policies, procedures, training, and internal reporting 
structures to ensure commitment to universal human rights. For 
those reasons, CalPERS supports the human rights proposal.
    Finally, country by country tax payment. Our principles 
focus significantly on emerging systemic risks and on fostering 
action that mitigates those risks. Current tax disclosures in 
the U.S. do not provide investors with sufficient tax-related 
information to adequately assess companies' values and risks. 
The legislation before the subcommittee would require the 
disclosure of overly aggressive international tax planning 
arrangements, thereby reducing systemic risk.
    We look forward to working with the subcommittee and 
committee to advance these and, hopefully, more proposals. 
Thank you for inviting me to participate in this hearing. I 
look forward to your questions.
    [The prepared statement of Mr. Andrus can be found on page 
53 of the appendix.]
    Chairwoman Maloney. Thank you very much.
    Mr. Atkins, you are now recognized for 5 minutes for your 
testimony.

  STATEMENT OF THE HONORABLE PAUL S. ATKINS, CHIEF EXECUTIVE 
                OFFICER, PATOMAK GLOBAL PARTNERS

    Mr. Atkins. Thank you, Chairwoman Maloney, Ranking Member 
Huizenga, and members of the subcommittee. Thank you for your 
invitation to discuss ESG disclosures and the SEC's disclosure 
regime more generally.
    My written testimony provides additional background on SEC 
disclosure requirements and the legislation under consideration 
today. I would like to spend my allotted time focusing on the 
significant costs that disclosure mandates impose on businesses 
large and small, investors, workers, and the American economy.
    Over the years, in administering the disclosure regime 
under the Securities Act and the Securities Exchange Act, the 
SEC has generally focused on the disclosure of information it 
believes to be important to the reasonable investor. The SEC 
explained in 1975 that the requirement that information be 
material is, ``necessary in order to ensure meaningful and 
useful disclosure documents of benefit to most investors 
without unreasonable cost to registrants and their 
shareholders.''
    While many seem to believe that disclosure is costless and 
harmless, the costs are real. Most significant is the direct 
costs of the disclosure, which were just three provisions of 
the Dodd-Frank Act which estimated to total more than $2 
billion annually.
    Disclosure overload is neither an imagined nor new concept. 
It is being used as a blunt force instrument by special 
interest groups and policymakers alike to attempt to impose 
normative outcomes; this being decried by members of SEC and 
the Supreme Court for decades. Yet mandatory disclosures have 
only grown, and there is a growing body of evidence that 
indicates these ever expanding and ever complex disclosure 
mandates hinder the goal of a sustainable and competitive 
economy.
    Data shows that expanding in complex mandates dissuade 
companies from going public. During the past 20 years, IPOs 
have been on the decline in the United States. In 1996, there 
were more than 600 IPOs in 1 year. Almost a decade later, there 
were fewer than 300 over a 2-year period. This downturn doesn't 
just affect investors; it affects the broader American economy.
    It is estimated that as much as 92 percent of job growth 
occurs after an IPO. A study by the Kauffman Foundation looked 
at companies that went public between 1996 and 2010, and found 
that they employed more than 2 million people in 2010 than they 
did before they went public.
    The Treasury Department under President Obama recognized 
this problem, and in 2011, created the private sector IPO Task 
Force. The task force surveyed CEOs and found that almost 75 
percent cited public disclosures as their biggest concern about 
going public. Of the public companies' CEOs surveyed, 92 
percent named the burden of public reporting as one of the most 
significant IPO challenges.
    An interim report by President Obama's Council on Jobs and 
Competitiveness noted that regulations have resulted in fewer 
high-growth entrepreneurial companies going public. In 2012, 
lead by members of this committee, Congress enacted the JOBS 
Act, which recognized that the public company disclosure regime 
inhibits companies from going public. The law established the 
regime to lessen those requirements on new emerging growth 
companies.
    Beyond company decisions, many ordinary investors are 
losing out on this valuable investment opportunity, especially 
compared to high net worth individuals who can more readily 
participate in private offerings. The venture capital firm 
Andreessen Horowitz compared the return multiples for tech 
firms of the 1980s with newer tech firms in the 2000s. In 1986, 
Microsoft returned to just over 200 times in private value 
creation, while its public value creation was roughly 600 
times. Oracle had similar return ratios in the same year. Now 
contrast this with Facebook in 2012 and Twitter in 2013, nearly 
all of whose returns were private.
    Since the passage of the JOBS Act, the number of IPOs per 
year has been almost 190, compared to an average 100 per year 
in the 5 years prior to the enactment. While this is a 
significant improvement, there still is more that can be done. 
Unfortunately, while all of the bills under consideration today 
are undoubtedly well-intentioned, the reality is that many of 
them set requirements already provided elsewhere in law, at 
best, or would mostly engender the type of unintended 
consequences that prior efforts have visited upon public 
companies, their investors, their employees, and U.S. economic 
growth.
    I will be happy to answer questions that you may have. 
Thank you very much.
    [The prepared statement of Mr. Atkins can be found on page 
40 of the appendix.]
    Chairwoman Maloney. Thank you very much.
    Mr. Wright, you are now recognized for 5 minutes for your 
testimony.

  STATEMENT OF DEGAS A. WRIGHT, CFA, CHIEF EXECUTIVE OFFICER, 
                DECATUR CAPITAL MANAGEMENT, INC.

    Mr. Wright. Chairwoman Maloney, Ranking Member Huizenga, 
and distinguished members of the subcommittee, I appreciate the 
invitation to appear before you this afternoon to talk about 
the proposed legislation that will provide greater disclosure 
of material information for investors.
    My name is Degas Wright, and I am the founding principal of 
Decatur Capital Management, an institutional investment 
management firm focused on global and sustainable equity 
strategies, serving public pension plans, corporations, and 
individuals. My comments provided today should not be 
considered a recommendation to buy or sell any of the 
securities mentioned. I am an investment manager who conducts 
company research to manage equity portfolios on behalf of our 
clients. Therefore, my interest in environmental social 
governance issues is based on the discovery that these items 
may provide material information.
    First, allow me to define material information or 
materiality. It is the information that a reasonable 
shareholder would consider is a point in deciding how to vote a 
proxy, purchase or sell a security. The legislation requesting 
disclosure of political contributions addresses a relative new 
material factor in the selection of securities. A recent CEO 
survey reports that more than half of the interviewed CEOs 
believe that the uncertainty of current political landscape has 
a larger impact on their business than in the past.
    These firms and their executives use political contribution 
as an effective tool to address political risk to protect 
shareholder value. Our research indicates that as political 
risks increase, political contributions increase. Therefore, 
political contributions may define the level of the 
corporation's political risk.
    We found that the majority of large corporations' returns 
were impacted as news of political and regulatory risk 
increases. The stock prices decline. Based on our research, we 
have found that political contributions as a proxy for 
political risk is materially making investment decisions. The 
legislation requesting disclosure of climate risk addresses a 
complex material impact on security pricing. This risk is 
difficult to measure for several reasons, since the risk 
parameters may be mispriced due to shortcomings in the 
available information.
    I will not address the science or legal issues regarding 
climate risk. As an investor, I tend to model risk factors and 
I treat climate risk as a factor. The best measure for 
materiality is the capital markets. A number of corporations 
have developed sustainability reports that include current 
levels of admissions and admission targets. This information 
should be required of all listed securities. Based on our 
research, we have found climate risk to be a material item in 
making investment decisions.
    The corporate tax legislation attempts to address potential 
tax avoidance risk. The amount of corporate income tax a 
company pays is material to its profitability. Investors, 
therefore, seek to understand the extent to which future cash 
flows are impacted by companies' tax liabilities. Therefore, 
corporate tax avoidance activities, while perfectly legal, may 
suggest underlying regulatory or reputational risk.
    The legislation requesting disclosure of human rights and 
value chain risk are material factors in the selection of 
securities. It is easy to understand that news of human rights 
violations can impact the reputation and the stock price of a 
corporation. Again, a number of firms have human rights and 
value chain policies. We recommend that all listed securities 
be required to provide this information. Based on our research, 
we have found human rights risks to be material in making 
investment decisions.
    We support the creation of sustainable finance advisory 
committee to advise the Securities and Exchange Commission on 
the evolving issues to ESG materiality and capital markets.
    Thank you for your time. The oversight work of this 
subcommittee is a critical responsibility. And I welcome any 
questions that you may have.
    [The prepared statement of Mr. Wright can be found on page 
84 of the appendix.]
    Chairwoman Maloney. Thank you very much.
    And Ms. Lubber, you are now recognized for 5 minutes for 
your testimony.

  STATEMENT OF MINDY S. LUBBER, PRESIDENT AND CHIEF EXECUTIVE 
                         OFFICER, CERES

    Ms. Lubber. Great. Good afternoon, and thank you. Thank you 
for your leadership on picking up these important bills.
    My name is Mindy Lubber. I run Ceres, a national 
organization that works with hundreds of influential investors 
and companies to tackle a number of the world's sustainability 
challenges, including water scarcity and pollution, 
deforestation, inequitable workplaces, and climate change. I 
appreciate the opportunity to be here to share our views on 
corporate disclosure of environmental, social, and governance 
issues, and to voice support for the various proposals being 
heard.
    I am going to speak in further specificity to the Climate 
Risk Disclosure Act of 2019, which we strongly support. These 
bills are firmly rooted in the principles of transparency, of 
materiality, and of investors' needs for adequate information 
to assure long-term returns.
    One of the things we do at Ceres, we run a network, an 
investor network on climate risk and sustainability, with 106 
institutional investors collectively managing over $26 trillion 
in assets. And since our founding 30 years ago, our members 
have consistently felt that sustainability challenges pose 
material financial risks and that these risks need to be 
embedded into our capital market systems.
    There are some who like to believe that sustainability 
risks are not real financial risks. But let's be clear. Risks 
are risks, and they need to be disclosed, whether they come 
from trade agreements from fluctuating commodity prices, from 
inflation, from currency changes or climate change. If they are 
real, if the risks are clear and material, they ought to be 
analyzed and disclosed. And it doesn't matter which box or 
category they come from.
    We have a long history at Ceres in the field of disclosure. 
As Tim said, we founded and launched the Global Reporting 
Initiative in 2007, and it is prospering with 13,000 plus 
companies reporting. And in 2010, Ceres and our investor 
network members petitioned the SEC to issue the first of its 
kind climate disclosure guidance.
    Despite the issuance of this guidance, which I will say is 
not being enforced, our research shows that half of the 600 
largest United States companies still do not provide decision 
useful disclosures on climate-related risks. Those that do 
often provide disclosures that are mere boilerplate or just too 
brief and effectively meaningless. So investors right now are 
simply not getting the information they need to understand how 
their portfolios are exposed, which in turn exposes them to 
potential losses.
    Mandating those disclosures, as you are suggesting to be 
done, will help companies better understand their own exposures 
and opportunities. And these rules will help stimulate their 
ingenuity and their strategic thinking. It will increase their 
competitiveness and create, not harm, but create shareholder 
value, or as the long-held business school mantra suggests, 
what gets measured gets managed, and with adequate and relevant 
information being measured, companies will manage their climate 
risks and do so better.
    And mandatory reporting as you suggest will create a level 
playing field where all companies, every company is required to 
provide the same information in consistent ways.
    Climate change is the greatest economic crisis of this 
decade and well beyond. And its implications are real. We can 
analyze them and they need to be disclosed. Nearly every sector 
of the economy is impacted, from food to agriculture, to 
transportation, to energy, to apparel, to technology and on and 
on, which is why so many companies, from Apple to Levi Strauss, 
to the Gap and others, are disclosing those risks. They are 
real and they are material.
    Consider the following: More than 200 of the largest global 
companies reported almost $1 trillion at risk from climate 
impacts, with many of those risks likely to hit in the next 5 
years. And our research shows that companies that do provide 
climate disclosures are more likely to set relevant goals and 
to have systems in place to make them more resilient.
    So while we applaud the companies that are showing 
leadership, voluntary reporting is simply not enough. It is not 
consistent. All players should be required. And the mandatory 
requirements laid out in this act are thoughtful. They are 
carefully designed. They meet the needs of investors without 
unnecessarily burdening companies. These risks can't always be 
avoided, but with the right information, they can be managed. 
And when the risks are fundamental, investors and companies 
need that information.
    Thank you for your efforts to make those disclosures real 
and available. I think they will change the course of 
information in our capital markets. We strongly support them, 
and look forward to seeing them.
    [The prepared statement of Ms. Lubber can be found on page 
61 of the appendix.]
    Chairwoman Maloney. Thank you very, very much.
    I now recognize myself for 5 minutes for questions.
    First, Mr. Andrus, as you know, opponents of ESG 
disclosures have been claiming for years that these disclosures 
aren't material to investors, even though we see more and more 
evidence every day that ESG disclosures are material to 
investors.
    So as an investment manager at one of the largest 
institutional investors in the world, I would like to ask you, 
do you consider ESG disclosures to be material?
    Mr. Andrus. Thank you very much for the question, 
Chairwoman Maloney. Yes, all of the bills that are presented 
today would require the presentation of material information in 
the regulatory reports. There is much discussion with regard to 
materiality without a full analysis of what materiality happens 
to be. There is not one definition of materiality.
    The TSE court, which focused materiality on voting, is 
limited to things that happened in the past. The basic court 
focused materiality on probability times magnitude, which 
focuses on things in the future. However, the SEC in item 303, 
which focuses on forward information, has a two-pronged test 
for what needs to be reported. And in that two-pronged test, 
all of the information that is presented today would fit within 
the current definition of materiality.
    There is some criticism, not only of materiality, but that 
of what reasonable investors want. I consider CalPERS to be a 
reasonable investor. As well as most of the largest investors 
in the country, all reasonable investors all desire to have 
more of this information presented. It is not limited to this 
country.
    The demand for ESG is a worldwide issue. Investors from 
around the world, all of whom I consider to be very reasonable 
investors because they have the same responsibilities that 
CalPERS has to pay money to beneficiaries, are focused on these 
issues. So, yes, these issues are clearly material.
    Chairwoman Maloney. Mr. Wright, do you agree with this?
    Mr. Wright. I do.
    Chairwoman Maloney. Thank you.
    Mr. Mohin, do you think the SEC could effectively build on 
the great work that your organization has done in establishing 
ESG metrics for companies to disclose?
    Mr. Mohin. Yes, I do. And in my testimony, I made a point 
about why that is important. As investment flows and capital 
flows increasingly rely on this information, it is important to 
have international standards. So if we draw a parallel to the 
financial standards a few decades ago, it was more sort of a 
patchwork system. And as we had the international financial 
reporting system and the FASB come together, now we have 
basically one system, and it has unlocked free trade.
    So it is very important to look at a single global 
language. And to do that, you really have to focus on an 
independent, international multistakeholder standard setter 
like GRI.
    Chairwoman Maloney. Could SEC standards essentially 
complement your organization standards?
    Mr. Mohin. What I would recommend is that SEC, like they 
have done with FASB, refer to an independent standard setter 
like GRI. That way you get the state of the art, it stays up to 
date.
    Chairwoman Maloney. Ms. Lubber, as you know, some companies 
already disclose a limited amount of information about the 
risks of climate change. But as you noted in your testimony, 
these disclosures are often inconsistent across companies and 
very often incomplete.
    Do you think Mr. Casten's bill would require companies to 
include sufficient detail on climate risk for investors? And 
how important is it for the SEC to include industry specific 
guidance on climate risk disclosures?
    Ms. Lubber. I think it is perfectly consistent with the 
SEC's role and mandate. Their role is to protect investors to 
assure material risk disclosure. They do it for many other 
issues. This notion that if it sounds environmental or social 
it can't be a real risk, but the risks are real. They are very 
real, they are very costly for a company who doesn't have 
enough water. The water risk is in hundreds of millions of 
dollars to PG&E that just found itself in bankruptcy because of 
the climate-related climactic changes that caused the fires. We 
are seeing billions and billions of dollars.
    Those risks are risks investors need to know. And the SEC 
is the place, with the kind of guidance offered in your bills, 
to structure the kind of material risks and disclosure of those 
risks so they are consistent with all other risks that 
companies are asked to disclose.
    Chairwoman Maloney. Thank you very much.
    The Chair now recognizes the distinguished ranking member 
of the subcommittee, Mr. Huizenga, for 5 minutes for questions.
    Mr. Huizenga. Thank you, Madam Chairwoman.
    I wasn't going to go here first, but I just was struck by, 
Mr. Andrus, in your written testimony, you noted that, 
``CalPERS' primary responsibility is to our beneficiaries.'' 
You talked about investing over the long term. And I couldn't 
agree more with that.
    However, one analysis of CalPERS' decision to disvest 
itself--or divest itself of tobacco-related products cost the 
fund and us hardworking CalPERS members over $3 billion. It 
doesn't strike me that losing money like that is in the best 
interest of your fund's beneficiaries, either short term or in 
the long term, particularly at a time when CalPERS is not fully 
funded.
    And I would like to note, Madam Chair, that CalPERS' newly 
elected president, Jason Perez, who is a police officer from 
Corona, California, seems to believe that losing money isn't in 
the best interest of his fund's beneficiaries either in 
campaign materials that he sent to eligible CalPERS voters last 
year. He criticized former CalPERS president Priya Mathur of 
putting CalPERS members retirement security at risk, ``due in 
part to environmental, social, and governance investing 
priorities regardless of investment risk.''
    So, Mr. Atkins, as a former Commissioner with the SEC, what 
impact does the--you talked about this in your written 
testimony--about the IPOs have on employment and job growth? 
And what does an uptick in U.S. IPO charters mean for mom-and-
pop 401(k) investors and others?
    Mr. Atkins. Thanks for the question. There are a lot of 
effects from a robust IPO market. One is particularly as a way 
for private companies to have an exit ramp to be able to then 
attract more capital and not just be private.
    Mr. Huizenga. Do these bills encourage IPO, the process, in 
your opinion, or do they encourage companies to identify and 
attract new investors? Or is this going to drive more of that 
into that private capital world?
    Mr. Atkins. Again, I think that imposing these sorts of 
detailed disclosure requirements, especially on smaller 
companies, in my own experience and as have been reflected in 
the surveys of CEOs and others, that is the one biggest 
impediment for people wanting to venture into the--
    Mr. Huizenga. There has been a lot talked about the 
responsibility of the SEC and the responsibility of 
corporations. And I have been dealing with section 1502 
implementation from Dodd-Frank. I wasn't here for the passage 
of Dodd-Frank, but we have been living with the echo effect of 
that. And that had to do with what I think everybody 
universally would agree is a positive attempt at curving a very 
real issue dealing with conflict minerals. But in its economic 
analysis, the final rule of the SEC said it is going to cost 
compliance. It is going to be between $3 billion to $4 billion 
initially and then $207 million to $609 million a year. Mary Jo 
White, President Obama's SEC Commissioner and Chair, had talked 
about what the proper role of the SEC should be in all of these 
things.
    And I am curious, as a former SEC Commissioner yourself, 
how would you feel about another group, as has been suggested 
by Mr. Mohin, setting standards that the SEC then needs to 
follow and rather than them coming up with those standards 
themselves or letting industry come up with that? So I am 
curious what you think of that idea.
    Mr. Atkins. I think it is best to leave it to the private 
markets to come up with the standards rather than designate yet 
another something like FASB or GASB, these various other groups 
to do that.
    Mr. Huizenga. So let's talk, and kind of finally here, 
about our competitiveness internationally. We are seeing IPOs 
go up a little bit. They are not nearly where they had been. 
And I am just curious if you believe that the Federal 
Government needs to force, under penalty of law, companies big 
and small to disclose this kind of information. Mr. Mohin, in 
his testimony, noted that some of his clients have been doing 
this for 20 years voluntarily.
    Is it necessary for the Federal Government and through the 
SEC to come in with a hammer and force them and maybe put them 
into a forum as had been suggested that not even the SEC would 
determine but that an outside group would determine?
    Mr. Atkins. Yes, it undoubtedly raises costs. And it is not 
just the cost of putting the disclosure together to hiring 
lawyers and all that, but it is the knock on the cost of threat 
of litigation and that sort of thing.
    Mr. Huizenga. And I will just note, Madam Chair, as my time 
is up, but I do believe that the most effective way of doing 
this is to make sure that this is voluntary by these companies, 
demanded by clients, customers, investors, beneficiaries, 
rather than having the Federal Government mandate this.
    So with that, I yield back.
    Chairwoman Maloney. The gentleman's time has expired.
    And the gentleman from California, Mr. Vargas, is now 
recognized for 5 minutes.
    Mr. Vargas. Thank very much, Madam Chairwoman. And, again, 
thank you for holding this hearing.
    Mr. Atkins, let me ask you a follow-up question, if I may. 
Do you think that climate change is real?
    Mr. Atkins. I don't know. It certainly is a topic of 
discussion, but I don't think that really matters.
    Mr. Vargas. You don't think climate change matters?
    Mr. Wright. No. It doesn't matter what I think.
    Mr. Vargas. Well, it does today, that is why we have you 
here, and it certainly matters to me. So, do you think climate 
change is real? And if it is, do you think humans have impacted 
it at all?
    Mr. Atkins. There are studies that show that is the case. I 
haven't really studied the studies. But obviously, it is a 
topic of discussion in the public sphere and elsewhere.
    Mr. Vargas. Have you followed it at all?
    Mr. Atkins. Well, of course, in newspapers and things like 
that.
    Mr. Vargas. And have you come to any conclusion yourself?
    Mr. Atkins. I think there is a lot of data out there that 
shows various ways. So, I haven't really come to any--
    Mr. Vargas. You haven't come to a conclusion one way or 
another?
    Mr. Atkins. Not that I focused on, no.
    Mr. Vargas. Okay. I think that is the problem.
    I think it is interesting, when I was in law school, one of 
the big issues was the issue of the ozone depletion. And we 
took it seriously as a country and we took it seriously as a 
world. We knew that the CFCs were, in fact, destroying the 
ozone layer, so we came up with alternatives and the world 
invested in these alternatives. And we found out that, in fact, 
you can see Mother Nature cure herself.
    And it is interesting that here, presume here there has 
been testifying, saying it doesn't know if it is real. When 
most of the scientists, in fact virtually all of them, point at 
climate change and say it is real. We see in California the 
fires are bigger. We see they burn hotter. We see all the 
flooding.
    It is interesting, one of the groups of people that I have 
met in my life, they are real cold blooded, are insurance 
actuaries. I used to be a vice president of Liberty Mutual. I 
could tell you, these people, they have cold water that runs 
through their veins. They simply look at the numbers.
    And it is interesting, these events that are happening 
every 100 years or 200 years, and they are happening in a much 
shorter time period. Something is changing. It is obviously 
climate change. All the scientists tell us that. There are a 
couple of kook scientists who say otherwise, but all the 
scientists point in the same direction and say, of course there 
is climate change. And that is why I think it is so important 
to have these disclosures. And again, I am sorry that the 
United States isn't leading on this as we should be and taking 
this seriously and not thinking it is some kind of a hoax.
    But I do want to get back to the issue of the destruction 
of shareholder value. Mr. Mohin, I heard here that, in fact, 
these disclosures will destroy shareholder values. It sounds to 
me it is just the opposite. Studies point the other way, do 
they not?
    Mr. Mohin. They absolutely do. And I wanted to thank 
Congressman Vargas for this legislation. It is fantastic 
legislation, because these issues, climate change, human 
rights, ethics, diversity, environment health and safety, these 
are critical issues. And if they were disclosed in an orderly 
fashion, then I think investors and companies would have far 
more information to make these all important decisions. If, in 
fact, they were included in the financial definition of 
materiality, we might not have these massive issues that we are 
facing today. So, it is very, very important to level the 
playing field.
    And if you look at what is happening in the world today, 
with the majority of companies, all the big companies reporting 
using the GRI standards, it is obvious the trend line here, 
companies are seeing it is important, investors are asking for 
the information, so it is already happening. I think where it 
is important for this subcommittee is to level the playing 
field so that we don't have those companies that are kind of 
lying in the weeds and not stepping up and reporting.
    Mr. Vargas. Mr. Andrus, do you agree with that? Do you 
agree that, in fact, this is valuable information for an 
investor like yourself for CalPERS?
    Mr. Andrus. Thank you for the question. Yes, it is valuable 
information. It is information we track. And in this particular 
case, we are asking you to basically instruct the SEC to make 
it a regulatory item such that we get comparable information 
from all of the companies and then we can shut down some of the 
noise on some of the issues that some other people, in fact, 
complain about. I think that items that are before you are 
critical issues that we track, and we look forward to 
additional disclosure.
    Mr. Vargas. I have to thank all of you for being here. My 
time is almost up. The only thing I would like to say is this: 
Climate change is not the only thing, but it is super 
important, and we have to take it seriously and start making 
decisions that impact it in a way that is positive, not 
negative.
    And I have 4 seconds left, so I will yield back. Thank you.
    Chairwoman Maloney. Thank you.
    The ranking member of the Full Committee, Mr. McHenry, is 
now recognized for 5 minutes.
    Mr. McHenry. I yield to my colleague from Arkansas, Mr. 
Hill.
    Mr. Hill. I thank my friend from North Carolina. And I 
appreciate all the witnesses, a very informed group, and very 
helpful to the committee's work.
    And I do come at this from the point of view that our 
officers and directors of our companies have a legal obligation 
in making--taking their obligations very seriously as a 
fiduciary under the business judgment rule, and therefore, 
something that is material should be disclosed. If it is a risk 
factor and it is material, it should be disclosed. If something 
is material financially, it should be disclosed, not only for 
the 5 years covered by the 10K, but in the outyears so that--
and shareholders can be informed. And that is a fundamental 
part of our system is that issue of materiality. And as a 
general statement, I think they do that.
    I have been a public company director. I have been an 
investment manager, so I understand that. And we balance that 
with the cost associated with these issues. And so, it is a 
very careful balance, just like Mr. Huizenga, my friend from 
Michigan, talked about the views of beneficiaries at CalPERS 
are doing that. And it seems that that over $130 billion 
shortfall or whatever the number is now in CalPERS has caused 
some beneficiaries to question that these decisions to not 
invest in certain categories were maybe a bad decision, in 
retrospect, after doing the study he cited.
    But there is a bigger issue, which is there are fewer 
public companies. And so, this issue is there are fewer things 
for CalPERS to invest in. So, I think that is why we are so 
diligent here about balance.
    Conflict minerals, Mr. Atkins testified about the cost. And 
I got a letter from a chief accounting officer of a $2 billion 
in market cap company the other day that is active in my--has 
representation in my State. And she told me that they have $1 
billion revenue in this company and that conflict minerals cost 
them $250,000 a year to comply with that rule, and they had no 
certainty really whatsoever if they were doing a good job or 
not. And she went on to tell me that in Form SD, she never had 
one question from an investor about the filing from their 
investor relations department about conflict minerals. And this 
is a company that sources different things in their inventory 
from around the world.
    I also come at this from the point of view that if we are 
reporting things that are material, then we can't just go from 
one subject to another and compel something as material because 
somebody thinks it is material, if it is not material in the 
judgment of these fiduciaries that we have appointed as board 
members. I quote here from a Fortune 500 board member: ``We are 
asked as a corporation to take a public stance on very 
complicated issues. We have crime in the cities. We have 1,000 
complicated issues that are very material to our civilization. 
But if we spend our time in a meeting taking public stands on 
all of them, I think it would be quite counterproductive.''
    I don't like the fact that people will constantly present 
this issue and never discuss a solution. And so, I think our 
companies are sensitive to their philanthropic objectives, et 
cetera. But that director was Charlie Munger at Berkshire 
Hathaway. His colleague, Warren Buffett, on the issue of 
climate change and insurance companies, and since they are a 
big property and casualty insurer, they said there are more 
material things on any 1 year that are more material to their 
pricing. And that in property and casualty pricing that changes 
every year. You are not making a 100-year decision and you are 
able to reflect those different risks.
    My final comment on this was I read an article just the 
other day, and here is the quote: ``A climate disaster 
triggered by the continued burning of oil and coal could result 
in the submergence of Florida, Holland, and other low-lying 
areas over the next 50 years, according to the Ohio State 
University.''
    Do you all agree with that? Does somebody agree with that? 
Because this article was written on February 2, 1978.
    So I don't know that, while we are concerned about these 
issues, if they are material to a company, I think they ought 
to be disclosed.
    Mr. Atkins, are there penalties if you don't disclose 
material information?
    Mr. Atkins. Well, severe penalties from the SEC, but then 
also private litigation.
    Mr. Hill. I think if it is material, officers and directors 
ought to have the right to determine that and customize it for 
their report and not be compelled to a uniformed standard set 
by somebody else.
    I thank my friend from North Carolina.
    Chairwoman Maloney. Thank you.
    The gentleman from Illinois, Mr. Casten, is now recognized 
for 5 minutes.
    Mr. Casten. Thank you so much, Chairwoman Maloney. And 
thank you so much to the panelists.
    I am excited to be here today, and I am very proud to have 
introduced the Climate Risk Disclosure Act with Representative 
Cartwright in the House.
    There are more than 200 of the world's largest listed 
companies who have forecasted climate change could cost them a 
combined total of almost $1 trillion, according to a report 
from the Carbon Disclosure Institute. But investors largely 
lack access to the basic information about the potential impact 
of the climate crisis on American companies. And not just 
companies. When Chairman Powell from the Federal Reserve was 
first here, not this morning, but when he first came earlier in 
the year, I asked him whether Fannie and Freddie mortgage 
lenders were factoring in the risk to a 30-year mortgage in 
low-lying areas, and his comment was that would be an 
interesting thing to think about, but he wasn't sure we did.
    That is a big deal if you are taking the other end of that 
risk. And there ain't nothing wrong with having transparency of 
information, despite what some folks here have said today. And 
I just would like to remind people that the SEC was not created 
in order to allow businesses to hide information and protect 
their profits. It was created to compel businesses to disclose 
information and protect investors.
    Capitalism is an awesome thing. It depends on competitive 
markets. And we best not forget that competitive markets depend 
on transparency of information, no matter how much we as 
business owners don't want to provide all that information.
    To that end, the Climate Risk and Disclosure Act would 
require public companies to disclose more information about 
their exposure to climate-related risks, which will help 
investors assess and, let's be clear, hedge those risks and 
effectively remove the subsidies that currently accrue to 
companies that aren't mitigating those risks. Risk and reward 
are related, right? And if people don't know what your risk is, 
they get to hedge it.
    That is the point of it. That is why 33 groups have 
endorsed the bill and are committed to addressing the necessity 
of climate risk disclosure.
    I would like to ask the Chair for unanimous consent to 
enter into the record this letter of support.
    Chairwoman Maloney. Without objection, it is so ordered.
    Mr. Casten. Thank you.
    How is my time? Close.
    The Task Force on Climate-Related Financial Disclosures, 
set up by the G20's Financial Stability Board, found in its 
report that climate-related disclosure had improved since 2016, 
but only about a quarter of companies disclosed information 
aligned with more than 5 of their 11 recommendations, and there 
was only a 3-percent increase from to 2016 to 2018in the number 
of firms disclosing.
    I want to start with Ms. Lubber.
    It is clear that some companies generally disclose climate 
risks, but those disclosures are typically very vague and don't 
always provide investors with a good sense of the scale of the 
risks that the company faces from climate change.
    Do you believe that the qualitative and quantitative 
disclosures of climate risks required by the Climate Risk 
Disclosure Act would be a meaningful improvement on the status 
quo for investors?
    Ms. Lubber. I think there is no question. The risks are 
real; they can be calculated. But they need to be consistent. 
They need to be comparable, company to company. Investors need 
that information, and the SEC ought to mandate the disclosure 
of it.
    We are talking about, or some of your colleagues, somehow 
this is an extraordinary extra burden. It ought not to be seen 
just as climate risk. It is a material financial risk, as you 
talk about. The SEC knows how to regulate that. They regulate 
it for inflation, for currency, for trade. They can regulate it 
for the material risks of climate.
    And I don't believe the burden is that high. I believe it 
is doable, manageable, could fit in under the regimes that they 
have. But it ought to be, as you designed in your bill, 
consistent, comparable, and, frankly, mandatory so the laggards 
don't get away with not doing it while the leaders do.
    Mr. Casten. So, Mr. Mohin, I was delighted to hear about 
what GRI has done. This is going to date me a little bit. 
Twenty years ago, one of my first jobs out of grad school was 
doing lifecycles, carbon modeling for companies like British 
Petroleum, using a lot of WRI data.
    Can you help us understand, if we were to adopt these rules 
tomorrow, do companies need to reinvent the wheel for how to 
actually go through and calculate these risks? Or, through the 
good work that GRI and WRI and others have done, are the 
templates largely in place at this point?
    Mr. Mohin. The templates are largely in place, Congressman. 
And they continue to evolve and grow as the mega-trends of 
having this information go from sort of more the reputational 
space into the global capital markets. The disclosures have 
become much more professionalized and the taxonomy 
standardized.
    Mr. Casten. Okay.
    Last question, with the time I have left, to Mr. Wright: 
Can you help me understand what the long-term risks are to 
investors in companies that fail to disclose these risks?
    Mr. Wright. Yes, it is very important. And one of the 
things that we are seeing is that many companies have already 
taken that upon themselves, to start reporting voluntarily this 
information. However, the information is not consistent. And 
that is the information we need to really understand the 
transitional aspect and the impact it has on employees and also 
investors.
    Mr. Casten. Thank you.
    I yield back.
    Mr. Vargas [presiding]. Thank you very much.
    The gentlewoman from Missouri, Mrs. Wagner, is now 
recognized for 5 minutes.
    Mrs. Wagner. I thank the Chair.
    And I certainly thank our witnesses for being here to 
testify today.
    The United States continues to experience a slump in the 
number of new businesses, which in 2017 hit a 40-year low. The 
U.S. is only seeing half the number of domestic initial public 
offerings, or IPOs, that it had seen just some 20 years ago, 
while, at the same time, the U.S. doubled the regulatory 
compliance costs a business must incur.
    While the U.S. IPO market is steadily decreasing, foreign 
markets, particularly in China, are growing. Instead of placing 
additional burdens on public companies, we should be 
encouraging more growth and more IPOs here in the United 
States, which will lead to more investment opportunities and 
choices for Main Street investors--Main Street investors, real 
people--to grow their savings and their retirement accounts.
    Commissioner Atkins, I too am concerned about the decline 
in American IPOs over the last few decades and the growing 
trend of American companies opting for private capital as 
opposed to public markets. Meanwhile, China's IPO market--are 
you ready for this?--they produced over one-third of the 
world's IPOs in 2017. China. Which makes the decline in 
American IPOs even more troubling.
    Why should we find these trends concerning, sir?
    Mr. Atkins. First of all, a robust public market is a good 
democratic type of situation to have, where people are going 
out to the public to raise capital rather than just private 
investors. And it is a lot cheaper to do it with private 
investors, the way things are now, and you are subjecting 
yourself to a lot more regulation if you go to public markets.
    Mrs. Wagner. Doubled--doubled--in the last 20 years.
    Would the bills discussed in today's hearing create 
additional requirements on American public companies, adding to 
their regulatory compliance costs?
    Mr. Atkins. Oh, I definitely think so, yes.
    Mrs. Wagner. How would the bipartisan capital formation 
provisions from the JOBS and Investor Confidence Act of 2018 
help encourage more U.S. IPOs and make us more competitive 
globally?
    Mr. Atkins. A number of those provisions--for example, 
taking aim again at Sarbanes-Oxley Section 404 is one example 
of unintended consequences of a lot more burdens on smaller 
companies. And so, the provision in that Act to extend the 
situation there for smaller companies to not have to be subject 
to that is just one. But there are others there that would 
increase access to capital and, that I think would be very 
helpful for growing companies.
    Mrs. Wagner. What else? What else should Congress be doing 
or not doing to make U.S. capital markets more attractive?
    Mr. Atkins. Well, reduce the regulatory burden. We talked 
about the conflict-minerals provision of Dodd-Frank. That was a 
huge gift to consultants, all sorts of consulting firms. Even 
if you look at your credit card, Citibank and others have to 
analyze that strip of metal on the back to make sure that there 
are no conflict minerals in it. So, that adds a huge burden 
even to the largest companies like that and, as well, to small 
ones.
    Mrs. Wagner. Any other things that you can cite that would 
make U.S. capital markets more attractive certainly from a 
regulatory reform--
    Mr. Atkins. So, as Chairman Clayton and his colleagues are 
doing at the SEC, I think, taking a real examination of the 
regulatory rule book that is there with respect to going public 
in the United States and remaining public. For example, they 
are looking at corporate governance and other things, because 
when you--
    Mrs. Wagner. Right.
    Mr. Atkins. Oh.
    Mrs. Wagner. Please, go ahead.
    Mr. Atkins. When you look at ESG, as Barbara Novick of 
BlackRock says, ``G'' is the most important part of the ESG.
    Mrs. Wagner. Thank you. I appreciate--
    Mr. Huizenga. Would the gentlelady yield?
    Mrs. Wagner. And I would yield, yes.
    Mr. Huizenga. I appreciate it. In the remaining seconds 
here, again, it strikes me, as we are hearing testimony about 
companies using and doing things without a government mandate, 
it begs the question of whether we have to have the Federal 
Government come in and force them to do these things that they 
see as good practices.
    So, with that, I yield back.
    Mrs. Wagner. Thank you. I yield back.
    Mr. Vargas. Thank you very much.
    The gentleman from Illinois, Mr. Foster, is now recognized 
for 5 minutes.
    Mr. Foster. Thank you, Mr. Chairman.
    And thank you to our witnesses.
    A newly released report from the London School of Economics 
examined instances of legal action on climate change for a 30-
year period, ending this year. The report found that climate 
change cases are on the rise worldwide, and, to date, climate 
change litigation has been brought in at least 28 different 
countries, with about three-quarters coming from the U.S.
    Increasingly, plaintiffs are making claims against 
investment funds and companies for failing to incorporate 
climate risk into their decision-making and for failing to 
disclose climate risk to their beneficiaries.
    Mr. Andrus, Mr. Wright, and Ms. Lubber, what can the rise 
in climate change lawsuits tell us about the need for more 
high-quality climate risk disclosures by companies?
    Ms. Lubber?
    Ms. Lubber. Certainly, we are seeing more lawsuits not only 
as it relates to investors but as it relates to fiduciaries--
board members at companies. And being somebody who trains 
corporate board members on the financial issues of climate or 
water, what they are telling us is they want more information, 
they don't want to be sued. They see their duty--one of the 
first duties of a fiduciary of a company is to analyze risk and 
act on it for the company.
    I think one way to make sure that we are not seeing 
lawsuits prevail is for people to have the information so they 
could act asresponsible fiduciaries and respond to the very 
real issues.
    But there is no doubt we are seeing more litigation in many 
parts of the world around climate change, and that will just 
grow. I think there are ways to head it off through better 
management.
    Mr. Foster. More clarity on the responsibilities to report 
and to factor these in would probably reduce the amount of 
litigation. Is that--
    Ms. Lubber. I am sorry. Could you--
    Mr. Foster. If there was more clarity on the exact 
responsibilities to factor in climate change into policies and 
decisions, then that would likely reduce the amount of 
litigation that you see.
    Ms. Lubber. Precisely.
    And the information that is being asked for is consistent 
with how the SEC does their business. It is not a massive new 
corporate burden. There will be definitions but as defined by 
the bills.
    We are just looking for material information that allows 
companies to manage themselves better and investors to know 
where their real risks are and where they aren't. And it allows 
fiduciaries, corporate board members, to know where their real 
risks are and where they aren't. And we all know better 
information leads to better decisions.
    Mr. Foster. Okay. Any other comments?
    Mr. Andrus?
    Mr. Andrus. Yes, thank you, Congressman.
    Basically, based upon what you are saying, it is additional 
evidence that what we are talking about is actually material 
and there is an actual need to have this information disclosed 
on a regulatory basis.
    Mr. Foster. Uh-huh.
    Now, Mr. Wright, as you noted in your testimony, that, as 
an investment manager, you measure climate risk for clients 
and, as part of that analysis, you routinely measure a 
company's baseline carbon emissions; however, of the 186 firms 
you evaluated, only 18 percent report their current level of 
emissions.
    Could you say a little bit about how having comprehensive 
information on emission levels for all companies in this sector 
might be helpful in making investment decisions?
    Mr. Wright. Yes. Thank you for the question.
    Basically, what we found is that environmental news can 
impact future stock prices. And so, as we have more information 
that is positive, that would actually benefit our holdings. So, 
as we get more information, we can make better decisions 
relative to the stocks that we own, to include the fact that 
these companies are making transitional plans, so we want to 
see what their future plans are, where we can price that into 
the stock valuation.
    Mr. Foster. Thank you.
    I guess that pretty much completes my question, so I yield 
back the balance of my time.
    Mr. Vargas. Thank you very much.
    The gentleman from Ohio, Mr. Davidson, is now recognized 
for 5 minutes.
    Mr. Davidson. Thank you, Mr. Chairman.
    And thank you to our witnesses. I appreciate your expertise 
and coming here and sharing it with us and, frankly, your 
passion for environmental and social goals and, I think, more 
on the underlying basis, for the high-functioning capital 
markets that are the envy of the world here in the United 
States.
    I think when you think about fiduciary duties, from what I 
gather, many of you simply want to look at a broader definition 
of a fiduciary duty, so that the fiduciary duty involves not 
just quantitative things like discounted cash flow but an essay 
question on, ``How do you feel about these environmental/social 
goals that are out there?'' Some of you might say, if you 
properly take those into account, you would get the same 
discounted cash flows across the board.
    I am just curious. All of you are involved at some level in 
the investment sector. And just go down the line. Does your 
firm currently employ ESG in their investing practices?
    Mr. Mohin. Thank you, Congressman. We are a standards 
setter, so that wouldn't apply to GRI.
    Mr. Davidson. Next?
    Mr. Andrus. Yes.
    Mr. Davidson. Yes?
    Mr. Atkins. We are a consulting firm, so no.
    Mr. Wright. Yes, we do.
    Ms. Lubber. And of our 160 investor members, whose assets 
total $26 trillion, they all in one way or another are 
analyzing ESG risks and incorporating them.
    Mr. Davidson. Thank you.
    And while we heard previous testimony that the companies 
that use ESG outperform those that don't, the studies on that 
are varied.
    And, frankly, even with CalPERS--Mr. Andrus, you 
highlighted that the CalPERS does use ESG as part of its 
metrics. And I am just curious, is CalPERS currently considered 
to be fully funded on its pension obligations or underfunded?
    Mr. Andrus. Congressman, we are underfunded. But it is 
important to point out that what is being discussed here is 
focused on disclosures--
    Mr. Davidson. Yep.
    Mr. Andrus. --which is additional transparency--
    Mr. Davidson. Got it. And I appreciate that.
    When I look at--for the record, Jason Perez, a CalPERS 
board member, estimates that it costs CalPERS $8 billion for 
divesting from tobacco, for example.
    And so, while tobacco is performing well, you can 
appreciate people on an individual level deciding, ``I am not 
going to invest in tobacco.'' And, at some level, a firm, you 
might feel that way, but an institution--when you are reserving 
and you are fully funded, that is one thing. When you are 
underfunded--I just talked with some of my teachers from Ohio 
today, and what they wanted to know is their retirement is 
secure. They don't want to take wild risks.
    And maybe you felt that you are protecting people not just 
from the harmful effects of tobacco but from a potential crash 
in the value of tobacco, and some of the bets turn out wrong in 
every investment. In fact, for every long there is a short, 
right?
    And so, when you look at the information that you are 
seeking to standardize, people would draw different conclusions 
on that. I just don't understand how that is different than the 
market functions today.
    For example, Mr. Atkins, my concern--in the current 
practice, using ESG goals, American Century Sustainable Equity 
Fund divested itself from ExxonMobil, but it increased holdings 
in ConocoPhillips because their corporate governance practice 
they found better. Same sector, different return. Do you see 
examples such as the one I described often, as it pertains to 
ESG funds?
    Mr. Atkins. Part of the problem with the whole ESG concept 
is it is very squishy. And so even a lot of the types of 
frameworks that are out there, it is very difficult to pin down 
exactly what it means.
    Mr. Davidson. And here is the closing thing I would say. 
Heavily institutional investors are relying on proxy firms. So 
proxy firms are required, or permitted, by the institutional 
investors when they take corporate proxies--not required. But 
the proxy advisors are dominated by two firms, 97 percent of 
the market. And they are already employing ESG. They are 
already influencing the market. They are influencing the 
practices of institutional investors.
    And I think it would be really nice to have a hearing at 
some point in the future on how proxy advisory is already 
influencing ESG.
    And, with that, I yield.
    Mr. Vargas. Thank you very much.
    The gentleman from Georgia, Mr. Scott, is now recognized 
for 5 minutes.
    Mr. Scott. Thank you, Mr. Chairman.
    Ms. Lubber, you spoke of the relationship between 
performance on environmental, social, and governance measures 
and company performance. As a matter of fact, in your written 
testimony, you state this. You say, ``Disclosure is valuable 
for its ability to stimulate ingenuity and strategic thinking 
by businesses, which can improve sustainability, performance, 
increase a company's competitiveness in a resource-constrained 
economy, and create shareholder value.'' That is a very good 
statement and a worthy one.
    Could you share with us a little bit, go into a little 
detail, what you meant by this and how influential you feel a 
company's performance is on these environmental, social, and 
governance measures to their overall performance?
    Maybe you could give us an example. Take an environmental 
issue like climate change. How does that relate to a company's 
performance?
    Ms. Lubber. Great.
    Mr. Scott. And then give me an idea--we talked about the 
example of the environment. What would be a social change? Give 
us an example of that and the climate change and tell us how 
that works.
    Ms. Lubber. Sure.
    Very quickly, on the social side, when Nike many years ago 
was found to be employing in their supply chain in Southeast 
Asia young children, sewing and stitching their soccer balls, 
that was a reputational catastrophe that hit their bottom line.
    And so they said, we have to be doing better, not only on 
the ``E'' side but on the ``S'' side. We want to know who is 
making our products, what standards they are being held to. If 
there are contractors, should those contractors be held to the 
same standards.
    And it is not only Nike. PepsiCo. PepsiCo has a program, 
Performance with Purpose, and they have goals on social, 
environmental, and governance issues. And what that has done is 
it allows them to better manage their supply chain and know who 
is doing what. It allows them to better manage the risks from 
water problems and climate problems.
    And, by doing that, they are providing their--studying the 
performance of those issues, they are disclosing them, and the 
disclosure forces them to manage it better. When they know that 
they have human-rights risks in their supply chain, they are 
acting and they are acting quickly.
    Mr. Scott. Well, let me ask you this, because you brought 
up the Nike thing. The most recent one is this business of the 
Betsy Ross flag on the sneaker brought up by Kaepernick. How do 
you evaluate that with truth and honesty? I was very torn with 
that. I am a sort of patriotic fellow.
    Ms. Lubber. Yes. So--
    Mr. Scott. I love this country.
    Ms. Lubber. Right. You are asking a great question. And I 
will say, reputational harm to companies can run to the 
shareholder value. Again, when Apple found out in their supply 
chain that there were toxic chemicals being used in some of the 
resources that went into the phones and what that meant on the 
health of their workers, that was a huge reputational risk. So, 
it does matter.
    What we saw at Nike--and not everything can be valued 
immediately. I will come back to places where you can more 
precisely value it. When you come back to Nike, when they first 
put out the Colin Kaepernick ad, my understanding is, first of 
all, it was a very thought-out decision by their board of 
directors. They knew it was a risk. When they first put it out, 
they saw a slight drop in sales. And then, in the week 
following it and the weeks since then, they have seen a 
straight uprise in sales.
    The public does vote in what they purchase, and they are 
looking for, all the polls show, companies that are consistent 
with the values of those consumers.
    Mr. Scott. So you are saying, in essence, that on this 
particular situation with Nike and the Betsy Ross flag that 
Nike made the right decision?
    Ms. Lubber. What I am saying is the consumers--I am saying 
that they made a decision, and it almost doesn't matter--just 
as Mr. Atkins doesn't know everything about climate change, I 
don't know everything about--but what we saw is, as it relates 
to share value, the strength and profitability of that company, 
they did well. And they did well, and they are hearing it from 
their consumers.
    The fact of the matter is, not every issue can be evaluated 
completely, but that is an example where we are seeing positive 
feedback from the most important people to Nike, their 
consumers.
    Mr. Scott. Thank you very much for your very well-thought-
out insight.
    Mr. Vargas. Thank you very much.
    The gentleman from West Virginia, Mr. Mooney, is now 
recognized for 5 minutes.
    Mr. Mooney. Thank you, Mr. Chairman.
    So, looking at these proposed bills, Mr. Atkins, let me 
just ask you this. The proposed bills require companies to 
disclose country-by-country reporting of tax payments.
    In your opinion, are the employees of the SEC international 
tax--are the employees of the SEC's--are they international tax 
experts with intimate knowledge of the tax laws of dozens of 
countries? And if not, do you think it is appropriate for 
Congress to pass an SEC disclosure bill knowing that the SEC 
cannot review the disclosures for accuracy?
    Mr. Atkins. Yes, I think that is very problematic. And I 
think largely, those things depend on the company, but are 
probably immaterial. And FASB already requires material issues 
to be reported like that in the financial statements.
    Mr. Mooney. All right.
    So, following up to that with other requirements that these 
bills would impose upon you or ask you to require you to come 
up with, Commissioner Atkins, to your knowledge, how many 
environmental law experts are on staff at the SEC?
    Mr. Atkins. I am not sure. There might be some people in 
corporation finance, but as far as scientists and all that, I 
don't know.
    Mr. Mooney. A couple more. How about, how many human rights 
experts are on staff at the SEC?
    Mr. Atkins. I am not sure.
    Mr. Mooney. And how many election law experts are on staff 
at the SEC?
    Mr. Atkins. I have no clue.
    Mr. Mooney. I think the goal--and the point I am trying to 
make, obviously, is the goal should be for the SEC and this 
committee to work on solving capital formation issues that are 
hindering American companies, entrepreneurs, and mom and pop 
investors. I think these bills are pushing you outside of your 
area of what SEC's mandate is.
    Mr. Atkins. I think that is fair to say.
    Mr. Mooney. Yes.
    Well, I think I have made my point. I know there are a lot 
of other people in the queue, Mr. Chairman, so I am happy to 
yield my time back to the ranking member or to--
    Mr. Huizenga. If the gentleman will yield?
    Mr. Mooney. Sure.
    Mr. Huizenga. If the gentleman will yield for a moment, I 
will take care of this little piece of business, because I do 
want to submit for the record five different articles, the 
first article being an article from The Wall Street Journal 
entitled, ``CalPERS' Dilemma: Save the World or Make Money?''
    The second is a report from the Institute for Pension Fund 
Integrity.
    The third is a report from the Pacific Research Institute.
    The fourth is an article from MarketWatch entitled, 
``Opinion: ESG--or Socially Responsible--Funds May Soothe Your 
Conscience But Could Weaken Your Portfolio.''
    And the fifth and final one is an article from Chief 
Investment Officer, ``CalPERS President Loses Her Board Seat.''
    Mr. Vargas. Without objection, it is so ordered.
    Mr. Huizenga. Thank you. I wanted to get that little piece 
of business done.
    And I think as my friend was making the point and as I was 
trying to make the point in a much shorter period of time with 
my colleague from Missouri, we have heard time and time and 
time again so far from the panel about how private businesses 
have made decisions.
    I happen to think it is stupid that Nike pulled the Betsy 
Ross flag shoes, but that is their decision. It is my decision 
whether I go and outfit myself with Nike or not. There are 
things like that that businesses make those decisions all the 
time. The question is, who is going to decide what the next 
Betsy Ross flag is or not and whether that should be part of 
somebody's social justice portfolio or not?
    I happen to think that it was a fairly innocuous flag from 
1774, I believe, or 1773, as I recall, before we were even 
declaring independence that didn't seem like a current social 
statement to me. In fact, it seemed like it might have been a 
workaround for the commentary on the current 50-star flag that 
had been of some consequence at the time.
    But, who is going to be making those decisions? I sure in 
the heck don't want it to be the SEC. And I certainly don't 
think that it ought to be some sort of other sidecar 
institution that the SEC has handed off that responsibility to. 
I am okay with a privately held company making those decisions 
and all of us voting with our wallets. But that is a very 
different equation than having the Federal Government come in, 
under penalty of law, deciding what those standards are that 
these companies should adhere to.
    I appreciate my friend from West Virginia yielding me his 
time, and I yield back to him.
    Mr. Mooney. I yield back, Mr. Chairman.
    Mr. Vargas. Thank you very much.
    The gentlewoman from California, Ms. Porter, is now 
recognized for 5 minutes.
    Ms. Porter. Hello.
    Mr. Atkins, you were an SEC Commissioner from 2002 to 2008, 
and some pivotal things happened during that time, like the 
setup for the global economy blowing up. And a key part of your 
job at the SEC during that time was to regulate the biggest 
broker-dealers. And while you were at the SEC, they began what 
is called the Consolidated Supervised Entity Program. And the 
SEC created this to oversee those banks. And there were five 
banks in that program, including some who are no longer with 
us, like Bear Stearns, Lehman Brothers, a couple survivors, 
like Merrill Lynch. And the whole point of that program was for 
the SEC, through supervision, to make sure those banks didn't 
collapse.
    Do you recall, how did those banks feel about this new CSE 
Program and this new alternative capital standard they had to 
meet?
    Mr. Atkins. I don't recall offhand.
    Ms. Porter. Okay. So they were actually quite happy. Lehman 
Brothers wrote that it applauds and supports the SEC for 
adopting this new rule.
    And so the 5 biggest banks were in this program in 2004, 
2005, 2006, 2007, and 2008, while you were at the Commission. 
Did the SEC assess the stability of those banks before you 
enacted the CSE Program?
    Mr. Atkins. Well, that was the staff in Trading and 
Markets. And I was assured by them that they had the capability 
and the wherewithal to administer the program.
    Ms. Porter. You were assured by the staff that those banks 
were stable and would be well-supervised by the CSE Program.
    Mr. Atkins. That they had the wherewithal to administer the 
program as we were adopting it.
    Ms. Porter. There were definitely issues with those banks 
right at the start that the SEC was fully aware of. One of the 
other Commissioners, Harvey Goldschmid, said during a 2004 
meeting, ``If anything goes wrong, it's going to be an awfully 
big mess. Do we feel secure, if these drops in capital occur, 
we really will have investor protection?''
    Did you have any similar concerns, and did you express 
them?
    Mr. Atkins. Oh, I did. As I said, my question of the staff 
was, do you have the resources to properly administer that 
program? And I was--
    Ms. Porter. So, despite the fact that while you were at the 
SEC as a Commissioner these banks became highly leveraged, were 
given weaker capital requirements and supervision, and a 
disastrous crash did in fact occur all under your watch, you 
have then publicly railed against labor unions, environmental, 
gay rights groups challenging the practices of big banks 
through shareholder activism. And, in fact, you called 
companies who ``cave to social activism'' ``weenies.'' And that 
is a direct quote.
    So you personally presided over the most disastrous 
financial downturn since the Great Depression. You did not 
stand up to the big banks. Why are you in a position to call 
other corporations who respond to their shareholders 
``weenies?''
    Mr. Atkins. I think that was a very unfair 
characterization. First of all, I didn't preside over it. I was 
a member of the Commission. And that is a body that, like this 
one, adopts rules and is the--
    Ms. Porter. You would like this committee to do more strict 
oversight over the SEC? Because I would probably be there for 
that. If that is what you are suggesting, I will inform your 
current Commissioners.
    Mr. Atkins. I was comparing the role of a Commissioner to a 
member of this committee.
    But be that as it may, there were many other financial 
institutions that were much more heavily levered than the banks 
in the CSE Program. But the staff, like I said, had assured 
me--
    Ms. Porter. Okay. Let's stop there. Reclaiming my time, 
what is your job now, Mr. Atkins?
    Mr. Atkins. I am a CEO of a consulting firm here in 
Washington, Potomac Global Partners.
    Ms. Porter. And what do you charge as a consultant?
    Mr. Atkins. I am sorry?
    Ms. Porter. What do you charge as a consultant?
    Mr. Atkins. It varies. It depends on the project and things 
like that.
    Ms. Porter. So I guess I am struggling, in a capitalist 
economy, as a capitalist, to understand why anybody would pay 
you big bucks when you, in fact, didn't stand up and were a 
weenie in the wake of the financial crisis and then are 
labeling other people that.
    The duty of a corporation--
    Mr. Huizenga. Mr. Chairman, that is inappropriate.
    Ms. Porter. Those are his quotes.
    Mr. Stivers. You just called him a weenie.
    We should take down her words, Mr. Chairman.
    Mr. Vargas. Was the--just to understand--and the time has 
expired. Just to understand the quote, were you quoting 
material that Mr. Atkins--so it is a direct quote from Mr. 
Atkins that you are quoting?
    Ms. Porter. Yes. He has called companies, ``weenies who 
often cave to social activists.''
    Mr. Atkins. I don't recall that, but whatever.
    Mr. Stivers. Mr. Chairman, I believe she called him a 
weenie and--a point of order.
    Ms. Porter. Let me ask you, Mr. Atkins--
    Mr. Stivers. That is different than a quote, Mr. Chairman.
    Ms. Porter. I would like to have my time reclaimed from 
this discussion.
    Mr. Stivers. Rule 17, rules of decorum, Mr. Chairman.
    Mr. Vargas. My understanding is that the witness is not a 
protected class. It only applies to Members of Congress.
    Ms. Porter. So let me just ask you, Mr. Atkins--
    Mr. Vargas. Your time has expired, though, so I apologize.
    Ms. Porter. Because of his objections?
    Mr. Vargas. Excuse me?
    Ms. Porter. Because of the objections?
    Mr. Vargas. There was about 3 seconds left, and I believe 
that your time was expired by the time that the objection was 
made. That is what I think I saw. I could be wrong.
    Ms. Porter. I feel very confident that I have made my 
point. Thank you.
    Mr. Stivers. Mr. Chairman, I would insist on my point of 
order, that we keep decorum in the hearing room. That is the 
obligation of the chairman.
    Mr. Vargas. Yes. And, again, we will keep decorum. Direct 
quotes, of course, are--I have heard things even from our 
President that I wouldn't repeat. But, again, those are direct 
quotes, and I believe that the quote was a direct one. But 
thank you for the objection.
    Okay.
    Mr. Stivers. I insist on my point of order.
    [Discussion off the record.]
    Mr. Vargas. A quorum is established, and the point of order 
is not sustained.
    The gentleman from Wisconsin, Mr. Duffy, is now recognized 
for 5 minutes.
    Mr. Duffy. Thank you.
    Mr. Mohin, how much do you make?
    Mr. Mohin. Pardon me?
    Mr. Duffy. How much do you make?
    Mr. Mohin. I am not sure that is material to the hearing.
    Mr. Duffy. This is all about disclosure. The gentlelady 
from California wanted to ask Mr. Atkins that, so how much?
    Mr. Mohin. I believe my remuneration is publicly available 
in our annual report.
    Mr. Duffy. So what it is?
    Mr. Mohin. It ranges each year depending on--
    Mr. Duffy. What was it last year?
    Mr. Mohin. $250,000.
    Mr. Duffy. Mr. Andrus?
    Mr. Andrus. $300,000.
    Mr. Duffy. Mr. Wright?
    Mr. Wright. I have elected not to answer that because I am 
a business owner and I have a--
    Mr. Duffy. We are all about disclosure here. This is 
transparency.
    Mr. Wright. But, however, I have--
    Mr. Duffy. You are declining to be transparent.
    Ms. Lubber, how about you?
    Ms. Lubber. $230,000. And it is fully disclosed in our 990 
and available to the public.
    Mr. Duffy. Thank you.
    So, Mr. Mohin, when we talk about things that should be 
disclosed, are there some harmful activities that you think 
should be disclosed to the public? So, in the banking sector, 
if banks bank certain industries, should that be disclosed?
    Mr. Mohin. Thank you for the question. Sir, we are a 
standards setter, so our role is to create the world's best 
standards using multistakeholder--
    Mr. Duffy. Standards for banks. Should banks disclose who 
they bank?
    Mr. Mohin. The disclosure based on our standards is really 
a matter for companies and the regulators of those companies. 
So we set the standards; others choose to use them or not.
    Mr. Duffy. We want to know, if you invest in a gun 
manufacturer or a gun retailer, is that something you think the 
public should know?
    Mr. Mohin. Again, sir, our disclosure--
    Mr. Duffy. I am talking about, do you think we should know 
that?
    Mr. Mohin. As a standards setter, it is not something that 
we have a position on.
    Mr. Duffy. Or about whether you invest in abortion clinics 
or THC or whether you support the American flag or whether you 
will bank detention centers. Are those things that you think 
are important for the public to know?
    Mr. Mohin. Actually, it is quite an interesting question, 
because our independent standards setting board actually 
chooses which standards go through that process, and none of 
the issues that you just mentioned have actually made it 
through that process. And so, by employing the world's experts 
in terms of what is a sustainability issue, none of those has 
actually gotten through.
    To the point that Mr. Huizenga made, some of these issues 
do bubble to the top--
    Mr. Duffy. So, on the social side, what do you want 
disclosed on the social side?
    Mr. Mohin. We actually have our disclosure standards. We 
have 33 topic-specific standards--
    Mr. Duffy. Give me a couple. What are your favorites?
    Mr. Mohin. Human rights, ethics, environment, health and 
safety. Some of the basics--
    Mr. Duffy. So, on the environment side, who sets the 
environmental standard? You guys do? You set the priorities?
    Mr. Mohin. No, no, we don't set the standards. The experts. 
We have subject-matter experts from--
    Mr. Duffy. You set the standards on what you should do on 
your environmental standards. So you have your experts 
internally--
    Mr. Mohin. Not internally, no, sir.
    Mr. Duffy. Externally.
    Mr. Mohin. They come from industry, they come from civil 
society--
    Mr. Duffy. How are you funded?
    Mr. Mohin. Pardon?
    Mr. Duffy. How are you funded?
    Mr. Mohin. We have sources of funding that are 70 percent 
self-funded and 30 percent from grants.
    Mr. Duffy. So, if you look at the political spectrum on who 
funds you, is it down the middle of the road? No political 
persuasion? Left? Right? Who funds you?
    Mr. Mohin. Of the 30 percent that is grant funding, it is 
majority government. So we have fundings from government that 
actually cite our standards in their legislation.
    Mr. Duffy. I would note that I think we should be focused 
less on your ESG requirements and we should focus on returns. 
And that is what CalPERS should probably do as well. Because if 
they continue to perform the way that they have, I am sure they 
are going to come to this institution and their members will 
come to this institution and say, we want more money, we want 
you to bail us out.
    And I guess, Mr. Atkins, to get your opinion, I think what 
this is is to try to set up disclosures to put political 
pressure on companies to do things that the Congress could 
never pass itself. So if you want companies to comply with 
different standards, whether it is global cooling from the 
1970s or global warming from the 1990s or now there is climate 
change today, pass it through the Congress. Right? Or if you 
don't like guns, debate it in the Congress.
    But I think what you want to do is get disclosures so you 
can put political pressure on companies to get them to change 
what they are doing because of political pressure. Am I wrong 
on that, Mr. Atkins? And if I am, you can tell me I am.
    Mr. Atkins. Sometimes, that is what, as I said in my 
testimony, either government or others try to use for normative 
reasons.
    Mr. Duffy. And to your point, I think you expressed some 
concern when you were asked about global warming. I think if 
you look at the predictions that have been made over the last 
30, 40, 50 years, most of them have not come to pass. Many of 
them have not. And so you might just go, how accurate have the 
predictions been, even from--go back to Al Gore's movie. Many 
of the predictions that were made didn't come to pass. And so I 
don't--I think that we--anyway, my time is up.
    I yield back.
    Mr. Vargas. Thank you.
    The gentleman from Texas, Mr. Gonzalez, is now recognized 
for 5 minutes.
    Mr. Gonzalez of Texas. I yield back.
    Mr. Vargas. The gentleman yields back.
    The gentleman from Ohio, Mr. Stivers, is now recognized for 
5 minutes.
    Mr. Stivers. Thank you, Mr. Chairman.
    Mr. Andrus, have you ever read the article that was 
submitted into the record, ``Save the World or Make Money?'', 
about CalPERS?
    Mr. Andrus. No, sir, I have not.
    Mr. Stivers. So what is your goal as an investment manager 
at CalPERS? Who do you work for? Who do you consider your 
fiduciary? And what do you consider your goal?
    Mr. Andrus. So I work for the Board of Administration. They 
are the fiduciaries of the--
    Mr. Stivers. I am sorry. Who do you work for the benefit 
of?
    Mr. Andrus. I work for the benefit of our pensioners and 
the workers of the State of California.
    Mr. Stivers. And can you explain to the folks in the 
hearing what happened in the chairman's race recently for the 
board of your pension?
    Mr. Andrus. Mr. Perez won a board election. And in the 
chairman's race, the board then selected another chairman.
    Mr. Stivers. I'm sorry, the Chair of your board lost her 
board seat, correct?
    Mr. Andrus. Correct.
    Mr. Stivers. What was that issue over?
    Mr. Andrus. I do not know what the issue was over. I do 
know what Mr. Perez ran on.
    Mr. Stivers. Okay. All I know is that it says here that it 
was angry pensioners and beneficiaries that felt like the fund 
was not focused enough on returns.
    What is the annual return of CalPERS? I saw something that 
said it is about 7 percent. Does that sound about right?
    Mr. Andrus. That is our discount rate. Over the last 10 
years, we have been above that.
    Mr. Stivers. Okay. And you recently had to change your 
amortization policy from 30 years to 20 years on investment 
losses, which forced all the pensioners and the public folks 
who fund those pensions to increase their contributions. Is 
that correct? That happened last year, February 2018. Is that 
correct?
    Mr. Andrus. That is correct. That is not the reason why 
that change was--
    Mr. Stivers. But the result was that pensioners are paying 
more money and local governments are paying more money. Is that 
correct?
    Mr. Andrus. That is correct.
    Mr. Stivers. So it seems to me that if I was an investment 
manager at CalPERS, I would be a lot more focused on increasing 
my rate of return for my pensioners, because they are the ones 
who are suffering right now. And I hope you will focus on that.
    I have nothing against environmental stewardship, 
sustainable social governance, and all that, but I think the 
key thing here is about the policemen and the firemen and the 
public workers that need the best return they can get.
    And I appreciate your answering my questions.
    Mr. Atkins, who decides materiality for a company?
    Mr. Atkins. The company itself, in their disclosure.
    Mr. Stivers. Who is in a best position to decide 
materiality for a company?
    Mr. Atkins. Again, the company itself.
    Mr. Stivers. I think so too.
    And are there a lot of societal issues we could decide 
that, gee, this is a great social justice cause?
    Mr. Atkins. I am sure among us all.
    Mr. Stivers. I believe the answer is yes. But is the most 
important social justice cause for a pension to provide 
pensions for their pensioners?
    Mr. Atkins. That is what it is instituted to do, yes.
    Mr. Stivers. Isn't that their purpose?
    Mr. Atkins. Yes, sir.
    Mr. Stivers. And if it doesn't benefit that purpose, is it 
helpful to the pensioners? Maybe. But if it hurts the return--
and it could hurt the return--it could actually damage the 
pensioners.
    And we have already had this asked and answered, but what 
happens to the number of public companies as you increase 
disclosure requirements on public companies? What choice will 
companies make on becoming public?
    Mr. Atkins. We have seen that overall regulatory burden, 
including disclosure burden, causes companies not to choose to 
go public.
    Mr. Stivers. And what does that do to mom and pop 
investors?
    Mr. Atkins. It provides them fewer choices for investment.
    Mr. Stivers. So, if you are a big pension like CalPERS, you 
can get access to private equity. Is that correct? You can 
still invest in those companies.
    Mr. Atkins. Depending on the rules of--
    Mr. Stivers. But if you are a mom and pop investor and you 
are a small-business owner, do you have those same 
opportunities?
    Mr. Atkins. Unless you are an accredited investor, probably 
not.
    Mr. Stivers. Probably not. And especially on Main Street in 
Logan, Ohio, and in Lancaster, Ohio, and Pickerington, Ohio, 
that I represent.
    And I am all for folks who want to use environmental and 
social justice as their investment strategy, but for those 
folks, aren't their companies that voluntarily disclose and 
give people options?
    Mr. Atkins. Oh, sure.
    Mr. Stivers. Thank you.
    I yield back.
    Mr. Vargas. Thank you very much.
    The gentleman from Arkansas, Mr. Hill, is now recognized 
for 5 minutes.
    Mr. Hill. Thank you, Chairman Vargas.
    Again, this has been a great panel and very informative. 
And thanks for your forbearance in being here this afternoon.
    There were a couple of bills that I haven't heard much 
discussion about. One was on disclosure on corporate taxes 
being paid that was proposed. And, again, it struck me as--I 
was confused, because, in my experience, corporate taxes are 
disclosed pretty well, I think.
    And I have pulled about 10 different public companies to 
look at their tax disclosure and their 10-K. Did it cover 
Federal taxes? The answer was yes. Did it cover State taxes? 
Yes. Did it disclose taxes they paid internationally? The 
answer was yes.
    And it also tends to, in the footnote, reconcile those, and 
it gives some additional commentary, depending on how 
complicated the company is, again, unique to the company, 
unique to this issue of financial statement preparation.
    Mr. Atkins, do we need this additional direction on taxes, 
tax disclosure?
    Mr. Atkins. I think it is problematic. Again, it is very 
focused, very detailed, as you were saying. I used to be a--
    Mr. Hill. What would investors gain from that compared to 
what people were reporting and have reported for decades now?
    Mr. Atkins. Well, already, companies need to report 
material information regarding their taxes, their tax 
liabilities and litigation and that sort of thing.
    Mr. Hill. It also seemed to imply that there was some 
interest in knowing business around the world. And, of course, 
of our Fortune 500 companies, 50 percent of revenues of the 
Fortune 500 are international.
    So I went and pulled for many of these same companies, does 
it disclose their business by country or region? And the answer 
is yes. I just pulled Procter & Gamble for fun. Forty-four 
percent in the U.S. and Canada, 24 percent of sales in Europe, 
9 percent in China.
    So I am missing something again in this bill, if this is 
necessary. Do we need more segment analysis? Are we missing 
something there?
    Mr. Atkins. Yes, again, it is very narrowly focused on tax 
issues by countries.
    Mr. Hill. Okay. Thank you for that.
    And then another bill that I noted was on political or--I 
guess, political expensing or lobbying expenses maybe. And this 
bill doesn't have a bill number. It is the Shareholder 
Protection Act about corporate expenditures over $10,000.
    Again, I have seen companies have proxy proposals on that 
year after year, and they just don't tend to pass. I think 
there are about 60 companies that had something related to 
disclosing lobbying expenses or political contribution 
expenses, and they got about a third of the vote in favor.
    So, in your experience as a Commissioner, what is the issue 
here? What am I missing on this? They have the ability to have 
a proxy solicited, go through a process in the annual meeting, 
and people don't seem to be interested in that information.
    Mr. Atkins. By and large, these sorts of proposals fail. 
And at a couple of companies here and there, they have passed, 
depending on the particular circumstances of the company. But, 
overall, shareholders reject these.
    Mr. Hill. Yes.
    I guess my main point here is, I agree with so many of the 
comments made today that companies have an obligation to 
disclose materiality things that will impact their business and 
their shareholder investing, whether it is related to climate 
change because they have risk associated with that. They have 
an obligation to disclose material risks now.
    The key thing I think that is important is they have that 
obligation, they have civil and in some cases criminal 
penalties associated with not reporting material standards. And 
the beauty of our system is, in fact, that it is unique to each 
company. Each company determines that board and that management 
team with full input. We have shareholder activists, we have 
institutional investors that some of you represent, all 
engaging in that conversation.
    And so I view these bills, while interesting ideas and 
well-meaning, I just don't think that they are needed and that 
these issues are being addressed now by boards of directors, 
shareholders, corporate officers, and our process that we have 
now.
    And, with that, Mr. Chairman, I yield back the balance of 
my time unless the ranking member wants time.
    I yield back.
    Mr. Vargas. Thank you very much.
    Before we wrap up, I would like to take care of one 
administrative matter. Without objection, I would like to 
submit letters and statements for the record from the Carbon 
Disclosure Project; Public Citizen; the Council for 
Institutional Investors; the FACT Coalition; Principles for 
Responsible Investment; Morningstar; Professors Cynthia 
Williams and Jill Fish; TIAA; and the International Corporate 
Accountability Roundtable.
    I would also like to thank our witnesses today. I think the 
information was very valuable. I know it got a little rough 
there at points, but I appreciate very much you being here and 
your testimony. It is invaluable. So, thank you.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is now adjourned.
    [Whereupon, at 3:57 p.m., the hearing was adjourned.]

                            A P P E N D I X



                             July 10, 2019

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                   [all]