[Joint House and Senate Hearing, 118 Congress]
[From the U.S. Government Publishing Office]





 
                 ESG PART II: THE CASCADING IMPACTS OF


                             ESG COMPLIANCE

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

                             JOINT HEARING

                               BEFORE THE

 SUBCOMMITTEE ON ECONOMIC GROWTH, ENERGY POLICY, AND REGULATORY AFFAIRS

                                AND THE

           SUBCOMMITTEE ON HEALTHCARE AND FINANCIAL SERVICES

                                 OF THE

               COMMITTEE ON OVERSIGHT AND ACCOUNTABILITY

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 6, 2023

                               __________

                           Serial No. 118-40

                               __________

  Printed for the use of the Committee on Oversight and Accountability
  
  
  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
  
  


                       Available on: govinfo.gov,
                         oversight.house.gov or
                             docs.house.gov
                             
                             
                              ______
 
             U.S. GOVERNMENT PUBLISHING OFFICE 
52-574 PDF          WASHINGTON : 2023
                        
                             
                             
                             
                             
                             
                             
                             
                             
                             
               COMMITTEE ON OVERSIGHT AND ACCOUNTABILITY

                    JAMES COMER, Kentucky, Chairman

Jim Jordan, Ohio                     Jamie Raskin, Maryland, Ranking 
Mike Turner, Ohio                        Minority Member
Paul Gosar, Arizona                  Eleanor Holmes Norton, District of 
Virginia Foxx, North Carolina            Columbia
Glenn Grothman, Wisconsin            Stephen F. Lynch, Massachusetts
Gary Palmer, Alabama                 Gerald E. Connolly, Virginia
Clay Higgins, Louisiana              Raja Krishnamoorthi, Illinois
Pete Sessions, Texas                 Ro Khanna, California
Andy Biggs, Arizona                  Kweisi Mfume, Maryland
Nancy Mace, South Carolina           Alexandria Ocasio-Cortez, New York
Jake LaTurner, Kansas                Katie Porter, California
Pat Fallon, Texas                    Cori Bush, Missouri
Byron Donalds, Florida               Jimmy Gomez, California
Kelly Armstrong, North Dakota        Shontel Brown, Ohio
Scott Perry, Pennsylvania            Melanie Stansbury, New Mexico
William Timmons, South Carolina      Robert Garcia, California
Tim Burchett, Tennessee              Maxwell Frost, Florida
Marjorie Taylor Greene, Georgia      Becca Balint, Vermont
Lisa McClain, Michigan               Summer Lee, Pennsylvania
Lauren Boebert, Colorado             Greg Casar, Texas
Russell Fry, South Carolina          Jasmine Crockett, Texas
Anna Paulina Luna, Florida           Dan Goldman, New York
Chuck Edwards, North Carolina        Jared Moskowitz, Florida
Nick Langworthy, New York
Eric Burlison, Missouri

                      Mark Marin,  Staff Director
       Jessica Donlon, Deputy Staff Director and General Counsel
                     Alan Brubaker, Senior Advisor
                 Reagan Dye, Professional Staff Member
                Kim Waskowsky, Professional Staff Member
      Mallory Cogar, Deputy Director of Operations and Chief Clerk

                      Contact Number: 202-225-5074

                  Julie Tagen, Minority Staff Director

                      Contact Number: 202-225-5051
                                 ------                                

 Subcommittee On Economic Growth, Energy Policy, And Regulatory Affairs

                      Pat Fallon, Texas, Chairman
Byron Donalds, Florida               Cori Bush, Missouri, Ranking 
Scott Perry, Pennsylvania                Minority Member
Lisa McClain, Michigan               Shontel Brown, Ohio
Lauren Boebert, Colorado             Melanie Stansbury, New Mexico
Russell Fry, South Carolina          Eleanor Holmes Norton, District of 
Anna Paulina Luna, Florida               Columbia
Chuck Edwards, North Carolina        Raja Krishnamoorthi, Illinois
Nick Langworthy, New York            Ro Khanna, California

           Subcommittee on Health Care and Financial Services

                   Lisa McClain, Michigan, Chairwoman
Paul Gosar, Arizona                  Katie Porter, California Ranking 
Virginia Foxx, North Carolina            Minority Member
Glenn Grothman, Wisconsin            Alexandria Ocasio-Cortez, New York
Russell Fry, South Carolina          Jimmy Gomez, California
Anna Paulina Luna, Florida           Greg Casar, Texas
Nick Langworthy, New York            Becca Balint, Vermont
Eric Burlison, Missouri              Summer Lee, Pennsylvania
                                     Jasmine Crockett, Texas
                                     
                         C  O  N  T  E  N  T  S

                              ----------                              
                                                                   Page
Hearing held on June 6, 2023.....................................     1

                               Witnesses

                              ----------                              

Ms. Mandy Gunasekara, Director, Center for Energy & Conservation, 
  Independent Women's Forum
Oral Statement...................................................     7
The Honorable Jason Isaac, Director, Life:Powered, Texas Public 
  Policy Foundation
Oral Statement...................................................     9
Mr. Stephen Moore, Distinguished Fellow in Economics, The 
  Heritage Foundation
Oral Statement...................................................    11
Dr. Shivaram Rajgopal, Roy Bernard Kester and T.W. Byrnes 
  Professor of Accounting and Auditing, Columbia Business School
Oral Statement...................................................    12

 Opening statements and the prepared statements for the witnesses 
  are available in the U.S. House of Representatives Repository 
  at: docs.house.gov.

                           Index of Documents

                              ----------                              

  * Article, The Washington Post, ``Protecting Public Pension 
  Investments''; submitted by Rep. Bush.

  * Article, Texas Public Policy Foundation (TPPF), ``Keep 
  Politics Out of Texas Pensions''; submitted by Rep. Fallon.

  * Report, Life:Powered, ``Corporate Collusion: Liability Risks 
  for the ESG Agenda''; submitted by Rep. Fallon.

  * Report, Life:Powered, ``Energy Discrimination: A Threat to 
  Capitalism, Prosperity, & Flourishing''; submitted by Rep. 
  Fallon.

  * Analysis Chart; submitted by Rep. Raskin.


The documents listed above are available at: docs.house.gov.


                   ESG PART II: THE CASCADING IMPACTS



                           OF ESG COMPLIANCE

                              ----------                              


                     Tuesday, June 6, 2023

                        House of Representatives

               Committee on Oversight and Accountability

                Subcommittee on Economic Growth, Energy 
                     Policy, and Regulatory Affairs

                                           Washington, D.C.

    The Subcommittees met, pursuant to notice, at 2:23 p.m., in 
room 2154 Rayburn House Office Building, Hon. Pat Fallon 
[Chairman of the Subcommittee on Economic Growth, Energy 
Policy, and Regulatory Affairs] presiding.
    Present from the Committee on Oversight and Accountability 
[Subcommittee on Economic Growth, Energy Policy, and Regulatory 
Affairs]: Representatives Fallon, McClain, Edwards, Bush, 
Raskin, Brown, Stansbury, Norton, and Krishnamoorthi.
    Present from Committee on Oversight and Accountability 
[Subcommittee on Health Care and Financial Services]: McClain, 
Grothman, Porter, Raskin, Balint, and Lee.
    Also present: Representative LaTurner.
    Mr. Fallon. This joint session of the Subcommittee on 
Economic Growth, Energy Policy and Regulatory Affairs and the 
Subcommittee on Health Care and Financial Services will come to 
order. We want to welcome everyone. Thank you for coming.
    Without objection, the Chair may declare a recess at any 
time.
    I recognize myself for the purpose of making an opening 
statement.
    I ask unanimous consent for Representative LaTurner of 
Kansas to waive on to the Committee for the purposes of asking 
questions during this hearing.
    Without objection, so ordered.
    Today's hearing will examine what ESG--environmental, 
social, and governance--initiatives really mean for workers and 
consumers and how the decisions made in boardrooms and global 
climate conferences have real-world impacts here at home. What 
are social impacts of using ideological activism to change 
corporate behavior, to change and really shape it? And that is 
the question that, really a vital question we need to answer 
here today.
    A few weeks ago, we heard from two very well-known and very 
well-respected state attorneys general about the dangers of 
what ESG policies mean when in the hands of activist asset 
managers. We know that asset managers control an estimated, and 
really astounding, $126 trillion, and that is with a ``T,'' 
trillion dollars, in financial resources in almost 30 percent 
of all global financial assets. This type of power and 
influence extends far beyond what most people can really even 
conceive of, and just like they say, with great power comes 
great responsibility.
    Millions of Americans across the country trust their 
investments will be used to make a profit and, hopefully, one 
that they can live on comfortably in retirement because what we 
are really after here when we are all investing long-term is 
financial security. But these days, it is not crazy for many 
Americans to wonder `will I even be able to afford retirement?' 
This Administration has driven inflation through the roof. It 
is at a 40-year high and pushed the economy to the brink of a 
major recession, which we all pray will not happen, but it very 
well could in the next year.
    Now, due to Democrats' ESG push, asset managers are 
prioritizing ESG goals over profit and risking Americans' hard-
earned money. With ESG investing, businesses are now tasked 
with accounting not only for their own carbon footprints, but 
maybe the footprint of their contractors and suppliers, the 
race and gender of their corporate boards, instead of the merit 
and performance of those same corporate board members.
    These are all factors that have come to be valued, and 
valued at least to activists and dominant asset managers, and 
woke corporate boardrooms as much, if not higher, than the 
actual returns that a business provides to their shareholders. 
To secure capital, the lifeblood of any business, companies 
large and small now must hire teams of lawyers and compliance 
consultants to comb through internal data and estimate exactly 
what their greenhouse gas emissions might or may be, or how 
many points they have scored with activist organizations for 
checking the right boxes on an ever-changing list of leftist 
social norms.
    Somehow this financial gamble, one that is played with your 
money and your investments, is supposed to still maximize 
returns for pensions and 401(k)'s. In fact, the Biden 
Administration is placing political ESG priorities over 
American retirements. The Department of Labor Prudence and 
Loyalty Final Rule allows fiduciaries to consider climate 
change as well as other ESG factors when making investment 
decisions.
    President Biden actually vetoed Congress' bipartisan 
resolution overturning this rule, financially risking the 
retirements of millions of Americans. This certainly sounds 
like the Biden Administration is sending mixed signals when it 
comes to American retirements and encouraging them, as we heard 
at the last hearing with the state AGs, to violate their 
fiduciary duties. Rules do not have a force, well, they should 
not have a force of law, and rules are below laws. That is what 
we are all here for. ESG is being utilized in an attempt to 
rewrite the fabric of America with, unfortunately, woke 
policies that deliver nothing but higher prices, fewer market 
choices, cultural oppression, not to mention jeopardizing 
returns on investments for retirees and regular Americans.
    I thank the witnesses for appearing here today and for 
their willingness to testify on this important issue. And with 
that, I ask unanimous consent to submit three statements into 
the record: ``Corporate Collusion'' by Life:Powered, ``Keeping 
Politics out of Texas Pensions'' by the Texas Public Policy 
Foundation, and ``Energy Discrimination'' by Life:Powered.
    Without objection, so ordered.
    Mr. Fallon. I now yield to Ranking Member Bush for her 
opening statement.
    Ms. Bush. Thank you, Mr. Chairman. St. Louis and I are here 
today because we understand the simple concept of cause and 
effect. We understand that when pharmaceutical giants, like 
Purdue Pharma, make their fortunes by getting people addicted 
to opioids, someone pays the price. We understand that when 
corporate governance failures lead to the collapse of banks and 
Fortune 500 companies alike, someone pays the price. We 
understand that when corporations recklessly pollute our 
communities or fail to consider how the climate crisis will 
harm people on the front lines, someone pays the price.
    Who pays the price? Our constituents. More specifically, it 
is our constituents who live in Black and Brown communities, it 
is the children in my district who are suffering from some of 
the highest asthma rates in the country because corporate 
polluters put short-term profits over the needs of people. It 
is the families in East Palestine who paid the price when they 
had to flee their homes because railroad companies cut corner 
after corner, inevitably leading to adverse health outcomes and 
environmental ruin. It is our workers who entrust their 
livelihoods and their earnings with their employers, only to 
have those employers go bankrupt after years of mismanagement 
and self-dealing. It is our constituents who will pay the price 
with their retirement funds and investments if Republicans 
succeed in their attempts to restrict the public's access to 
data.
    Environmental, social, and governance elements, commonly 
known as ESG factors, have material and defining benefits on 
companies' bottom lines. Companies that face and responsibly 
address this reality carry less risk, both for themselves and 
for society overall. Companies that deny this reality and 
pretend their actions do not have consequences are not only 
delusional, they are dangerous. ESG principles are designed to 
protect investors, workers, and retirees from the financial 
risks of bad business practices by responsibly considering all 
available data about potential investments.
    Responsible investing depends on ESG data to facilitate 
prudent planning for long-term challenges. That is why 
Democrats are working to protect access to this data so that 
financial professionals and the public are free to make 
responsible and economically beneficial investment choices. For 
example, under the Biden-Harris Administration, the Department 
of Labor finalized a rule reversing a Trump-era regulation that 
prevented retirement plan fiduciaries from considering ESG data 
when seeking to maximize investment returns for plan 
participants. The Securities and Exchange Commission is also 
working on rulemakings to require publicly traded companies to 
disclose climate risk information and make ESG disclosures more 
standardized, more consistent, and more reliable.
    The MAGA insurrectionist Republicans' political crusade 
against responsible investing is an attempt to manufacture a 
culture war and protect corporate special interests, all at the 
expense of taxpayers and their savings. For example, in 2021, 
Texas barred municipalities from contracting with banks that 
have ESG policies regarding fossil fuel and firearms companies. 
The move cost taxpayers an additional $300 million to $500 
million in interest in the first eight months alone. The vast 
majority of the public, Democrats and Republicans alike, oppose 
government efforts to restrict responsible investing. They 
understand that investments have better returns when financial 
professionals are free to consider all data, including 
environmental, social, and governance risks and opportunities.
    Over the past few months, the GOP has made it clear that 
they have no problem putting the public in harm's way for 
political gain and using the debt limit to take our economy 
hostage. They willingly risked the full faith and credit of the 
United States simply to push through politically unpopular 
policies that could not otherwise win the votes it needed. By 
attempting to prohibit responsible investing practices, they 
continue to risk the retirement security of hardworking people 
simply to protect corporate special interests that cannot 
attract investment on their own merits.
    To reiterate the clear message of our previous hearing on 
this topic, transparency, and responsible management of 
environmental, social, and governance risks is the bare minimum 
we should expect of corporations, such as those that are 
headquartered in St. Louis, that bear a responsibility to the 
communities they touch and the people that invest in them. This 
access and freedom is just common sense, it is common decency, 
and smart business practice. Thank you, and I yield back.
    Mr. Fallon. Thank you. I now yield to Chairwoman Lisa 
McClain of Health Care and Financial Services Subcommittee for 
her opening statement.
    Mrs. McClain. Thank you. Before I was in Congress, I 
actually was a financial services professional. I actually 
understand fiduciary responsibility and fiduciary duty. I 
understand what it is like to run a business because I did not 
talk about it, I actually did it. I understand how important it 
is for those entrusted to manage the wealth of Americans across 
the country to protect that wealth and to work to grow that 
wealth for Americans. Yet today, that is simply not happening.
    Money managers' unrestricted ability to pursue ESG pledges 
without their clients' knowledge is doing the opposite. And I 
always scratch my head, because I do agree with my colleague, 
we should have transparency, but if we are going to be 
transparent, let us really be transparent. What are we hiding? 
We should not need to hide anything, so let us be transparent. 
It is not their money manager's job, it is not their job to 
pursue political agendas. It is their job to actually manage 
the accounts for return on investment. It is their job to 
invest their clients' money by putting their clients first and 
focus on rates of return. Again, it is not their job to instill 
their political agenda under the cloak of darkness, right--we 
want to be transparent--without their clients' knowledge.
    And again, I ask, what are we hiding? In fact, it is their 
fiduciary responsibility to do just that. Yet, we are seeing 
more and more instances of woke corporations importing European 
values over American values and hiding it, and they are not 
even telling their clients about the financial risks associated 
with adapting these values. I mean, we want to be transparent. 
Let us be transparent with the risks.
    Even the so-called neutral, non-ESG investment funds are 
increasingly voting for ESG resolutions in some cases more so 
than ESG funds. And again, they are not telling their clients. 
Why? What are they hiding? Why is there a lack of transparency? 
Again, I have no idea what they are hiding. Well, it looks like 
they are hiding the ball because we all know that if the 
clients knew the truth, they would not approve. That is why 
they have to hide it.
    The fact is that they are funding their woke agendas using 
Americans' hard-earned retirement savings without any 
accountability until now. I am for the freedom to invest your 
own money into the causes you, the client, actually believes 
in, but that is not what is happening here. Managers are 
investing your money in causes they believe in, and we are 
seeing real consequences for Americans' retirements.
    Americans' retirement assets were down nearly 15 percent 
last year, 15 percent. This includes state pension funds. State 
pension funds supports teachers, librarians, firefighters, and 
other public sector employees. Some states, such as Texas and 
Kansas, are actually getting in front of this by advancing laws 
that restrict investments that consider non-financial factors. 
Remember, they are in the financial sector. They should be 
focusing on financial factors, like ESG for state pension 
funds.
    Unfortunately, the Biden Administration recently issued a 
rule that makes the problem even worse. Now, plan fiduciaries 
that fall under the ERISA are empowered to consider ESG factors 
when selecting investments. Well, I am going to be sarcastic. 
``ESG,'' does that mean they can empower themselves to consider 
any agenda they want? What if it was a pro-life agenda? That 
would be horrible, right? We would be all up in arms about 
that, and we would want transparency, right? Well, what is good 
for the goose is good for the gander. The President vetoed a 
bipartisan congressional resolution actually overturning this 
rule. This is just one step in this Administration's job to 
push ESG into a more prominent role in a financial decision-
making.
    Today's hearing is a continuation of this Committee's 
broader efforts to shed light--to shed light--on the long-term 
impacts of ESG's agenda. We are delivering accountability and 
transparency. I thank the witnesses for being here, and we look 
forward to your testimony. And with that, I yield to the Chair.
    Mr. Fallon. Thank you, and I now yield to Ranking Member 
Katie Porter from California for her opening statement.
    Ms. Porter. Capitalism means economic freedom. It means 
choices. Here in America, when I go to buy a car, I do not have 
to buy the cheapest car. I can buy a minivan that is 
comfortable for my family of four and provides plenty of 
storage. In our capitalist system, I am glad that I do not have 
anyone powerful telling me what I should like or what I should 
buy. If the product is safe for the marketplace, I can choose 
it.
    I would like anyone here who thinks we should have less 
economic freedom to please raise their hand. Republican or 
Democrat, it seems like everyone is comfortable with letting 
consumers pick what they want, how they want from a marketplace 
of responsible goods and services. So why are Republicans 
worked up about investors choosing to invest in a company based 
in part on its performance on environmental, social, or 
governance data? Republicans want to force Americans to pick 
our investments based on dollars and cents alone. That would 
limit economic freedom.
    Let us see if Republican limits on financial decision-
making would give me more freedom if I use that same framework 
to buy a new car. I mentioned my minivan. Someday I need to 
trade one for a new one. I want one that is really fuel-
efficient. I also want one that is not country blue because 
that is not cool. Let us say I go for the new car. I walk into 
a dealership in a state that has banned showing consumers any 
data or information other than financial info. Wow. To give me 
only the financial info, the dealers had to cover up all the 
cars. I see a sign that shows me things like price and expected 
depreciation, but I cannot see the color, the model, the fuel 
efficiency, whether it was made in America, because those are 
not directly related to its value. I am struggling to figure 
out how to find the environmentally friendly minivan that I 
want without any fuel efficiency information. I would struggle 
to find a truck that was made in America, paying the highest 
costs for good workers in my district, if they ban data on 
labor.
    Republicans say none of those things should matter to me. 
According to them, the cost alone should guide me to what I 
value. So, I find a few covered up cars in my price range, and 
I buy one that depreciates the slowest because that is the only 
information that I have. I cross my fingers and I hope that I 
get the car that I value the most. I uncover the car to drive 
off the lot. I got a three-row SUV that guzzles gas that was 
made in China. It is a color that I hate. I stayed within my 
budget and got an economically sensible vehicle, but I got 
nowhere close to what I wanted.
    Who thinks I have more freedom like that? Of course I do 
not. I am freer when I know all of the features of the car I am 
buying, including things like fuel efficiency and labor costs. 
Then I can choose what information matters to me, ignore the 
information that does not matter to me, and freely make a 
purchase. The same thing applies to investing. If I value 
investing in a company that prioritizes energy efficiency, I 
cannot make that free choice. If Republicans limit information 
on the company's environmental footprint, what kind of freedom 
is that for me as an investor?
    Let us call this hearing what it is. It is an attack on 
economic freedom. Republicans apparently do not want investors 
to know if a hugely profitable company outsources to China, if 
they have a huge carbon footprint and are unprepared for 
climate change, or if they treat their workers horribly. It is 
a lot more comfortable for them to just cover up all that 
information so that they can get what they really want, big 
corporate profits at all costs, rather than what investors 
really want, which is more information about their investments.
    The uncomfortable truth is that withholding ESG information 
from the market means denying investors the freedom to decide 
where they want their dollars to go. A couple of minutes ago, 
nobody said that they wanted to reduce economic freedom, so let 
us not be hypocrites. Let us not use this hearing to reduce 
economic freedom for investors. I yield back.
    Mr. Fallon. I am pleased to welcome today's panel of 
witnesses. First, I would like to welcome Mandy Gunasekara--
yes, did I get it right, all right--Director of Center for 
Energy and Conservation at the Independent Women's Forum. Our 
second witness today is Jason Isaac, an esteemed veteran of the 
Texas House of Representatives, who I served with for four 
years, I believe, together, the Director of Life:Power at the 
Texas Public Policy Foundation in Austin. And then our next 
witness is Stephen Moore, who currently serves as a 
distinguished fellow in economics at the Heritage Foundation. 
And our last witness is Dr. Shivaram Rajgopal--close, yes--who 
is the Roy Bernard Kester and T.W. Byrnes Professor of 
Accounting and Auditing at Columbia Business School. I welcome 
all of the witnesses here today, and I look forward to hearing 
your testimony on this issue.
    Pursuant to Committee Rule 9(g), the witnesses will please 
stand and raise their right hands.
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, the whole truth, and nothing 
but the truth, so help you God?
    [A chorus of ayes.]
    Mr. Fallon. Thank you. Let the record show that the 
witnesses all answered in the affirmative.
    We appreciate you all being here and, again, look forward 
to your testimony.
    Let me remind the witnesses that we have read your written 
statements and they will be appearing in full in the hearing 
record. Please limit your oral testimony to five minutes. As a 
reminder, please press the little button on the microphone in 
front of you so that we can all hear you. And it will be green 
for four minutes, yellow for one minute, and then read, zip it, 
wrap it up, finish that sentence, and let us move on down the 
line, like a carrier landing, you know, hit the cables.
    I recognize Mandy Gunasekara to please begin her opening 
statement.

                     STATEMENT OF MANDY GUNASEKARA

                                DIRECTOR

                    CENTER FOR ENERGY & CONSERVATION

                       INDEPENDENT WOMEN'S FORUM

    Ms. Gunasekara. Thank you. Chairman Fallon, Chairwoman 
McClain, Ranking Member Bush and Ranking Member Porter, as well 
as Members of the Subcommittees, thank you for the opportunity 
to participate in today's hearing discussing the consequences 
of ESG. My name is Mandy Gunasekara, and I'm the director of 
the Independent Women's Forum Center on Energy and 
Conservation.
    As American families continue to struggle under rampant 
inflation, increased energy costs, and an economy on the verge 
of recession, a subset of financial elites and their allegiance 
to environmental, social, and governance, or, rather, ESG 
investing, are making matters worse. While branded as an 
investment strategy for good, ESG manipulates markets as well 
as access to markets in order to advance a leftist political 
agenda.
    The ``E'' standards result in higher cost to energy, 
unreliable electricity grids, and stand to undermine 
environmental progress. The ``E'' standards also enrich high-
end asset managers at BlackRock, State Street, and Vanguard at 
the expense of retirees and pensioners as standards force 
companies to engage in controversial political issues, such as 
campaigns to defund the police or promoting gender transitions 
in children, cultivating division in the workplace and the 
marketplace. ``G'' standards give the appearance of diversity 
while restricting freedom of thought and competing viewpoints 
in the work force.
    Now, ESG standards are purposefully complex and convoluted 
in the hopes that the everyday man and woman will not catch on. 
Well, I want to highlight four important perspectives and how 
they are impacted by ESG. First, the bill payer; second, the 
entrepreneur; third, the retiree; and fourth, the worker.
    First, the bill payer. The most economically devastating 
policies of ESG fall under the E-rubric. The goal is to 
phaseout fossil fuel energy by 2050, despite the fact that over 
80 percent of the energy we need to fuel our economy and modern 
way of life comes from oil and natural gas. ESG is also a 
contributing factor to high-cost gas, expensive electricity 
prices that hit low-income households the most, forcing some to 
choose between food or electricity. Additionally, 1 in 6 
American families is currently behind on electricity bills. The 
cost for an average household has risen approximately $10,000 
over the past two years, and these costs are squeezing the 
middle class, making it virtually impossible for low-income 
Americans to ever cross the middle-class threshold. In sum, ESG 
is a barrier to upward mobility.
    Next, the entrepreneur. ESG does not just target oil and 
gas companies, which is bad enough, it is also used by 
progressive activists to defund and constrain the growth of 
other politically disfavored--that is, politically disfavored 
from the left--companies, including firearms manufacturers and 
animal agriculture. These misguided efforts create a range of 
perverse outcomes beyond lost jobs and economic growth to 
companies deemed bad by ESG standards. It makes the realization 
of the American Dream contingent on acquiescing to the demands 
of the woke left.
    Next, there is the retirees and the pensioners. Asset 
managers at BlackRock, Vanguard, and State Street, which 
collectively manage over $21 trillion, including a large 
portion of U.S.-based retirement funds, subscribe to ESG. 
Numerous reports have found that ESG funds consistently perform 
worse than non-ESG funds, producing lower returns for the 
retirees and the pensioners that have been planning for them. 
And even though the retirees and the pensioners are losing out, 
the high-end financial advisors at these investment houses are 
making bank. They get paid their premium fees no matter what 
and essentially have nothing to lose.
    Finally, the worker. Some analysts have found that 
oppressive governance policies that prioritize checking 
superficial boxes results in decreased viewpoint diversity. It 
forces employees to curb free speech and to stay silent on 
matters of which they fundamentally disagree. Also concerning 
are some companies will incorporate diversity language solely 
for marketing benefits, undermining actual progress in the 
workplace.
    Now, by design, ESG has been developed to achieve leftist 
goals that have failed to gain traction in Congress and state 
legislatures and are increasingly being shut down by the 
courts. It is designed to circumvent the role of voters, to 
circumvent the democratic process, and to use the might of the 
financial sector to force Americans into accepting an agenda of 
which the majority disagree. As awareness of ESG increases so, 
too, does the opposition.
    So, I thank the Subcommittee for the opportunity to testify 
today and your willingness to educate the public on what ESG is 
and its harmful downstream effects. I look forward to your 
questions.
    Mr. Fallon. Thank you. I do not think this is your first 
time. You landed almost exactly at five minutes. Thank you very 
much. Very well done.
    The Chair recognizes Mr. Jason Isaac for his five minutes.

                 STATEMENT OF THE HONORABLE JASON ISAAC

                         DIRECTOR, LIFE:POWERED

                     TEXAS PUBLIC POLICY FOUNDATION

    Mr. Isaac. Thank you, Mr. Chairman, Members. Again, I'm 
Jason Isaac. I'm the director of Life:Powered, a national 
initiative of the Texas Public Policy Foundation to raise 
America's energy IQ. And I live a high-carbon lifestyle, and I 
think the rest of the world should, too. It is truly where you 
have human flourishing.
    Look back to 2019 and then candidate for President, the 
first-ever candidate on the face of the earth to run as a net-
zero candidate, ran and was elected as president of Sri Lanka. 
In 2020, he began his efforts to decarbonize. At the time, Sri 
Lanka was a near-perfect ESG-rated country, 98 out of 100, one 
of the highest ESG-rated countries on the face of the earth. 
And he began to implement his ESG policies, which might be 
better known as everyone's suffering guaranteed, or what it 
does to energy and food, makes it expensive, scarce, and 
government-controlled.
    But in 2020, he made his push toward net-zero and pushed it 
onto the people of Sri Lanka that were once prospering, that 
were actually exporting food and other commodities around the 
world, lifting them up to prosperity for the first time in 
their existence. He banned the use and importation of nitrogen-
based fertilizers. That resulted in a 40-percent decrease in 
food production and 80-percent increase in cost. And today, 9 
in 10 families in Sri Lanka are facing hunger every single day, 
making energy and food expensive, scarce, and government-
controlled.
    Now, in 2019, shortly after I joined the foundation, I was 
visiting with some energy producers, and they were telling me 
stories about how they were having trouble getting access to 
capital because they produce oil and gas, and I thought, no, 
this cannot be the case, not in America. We produce energy more 
responsibly than anywhere else on the face of the earth. Why 
would we want to shift production away from the United States 
into places that have lax environmental controls or human 
rights standards? Certainly, we would not want to do that.
    But as I dove into this and started visiting with more and 
more energy producers that were being kneecapped, having their 
energy resources taken away from them, I thought, we need to 
write some policy in the state of Texas. And so, in 2020, I 
began writing and drafting a bill that ultimately became Senate 
Bill 13 that says, if you are going to boycott, divest, or 
sanction companies that produce energy in Texas, then you are 
no longer welcome to do business with the state of Texas, the 
9th largest economy on the face of the earth. That legislation 
passed with overwhelming broad bipartisan support in both the 
Texas House and the Texas Senate. They took America first.
    And today, there are 11 financial institutions that are on 
the boycott list in the state of Texas, one of them being the 
largest financial institution on the face of the earth, 
BlackRock, who does invest in fossil fuels, who does invest in 
oil and gas, but forces companies to sell assets much like 
Exxon. They replaced board members with activist board members 
that want to decarbonize a business that produces hydrocarbons. 
That is like de-fooding a restaurant. That does not work out 
too well for anyone, not the employees, not the consumers, not 
the owners, not the shareholders, no one, but yet they have 
done that. And Exxon sold assets in Southeast Asia where they 
were going to produce oil and gas, and I argue, again, they 
would probably produce that oil and gas more responsibly than 
anywhere else on the face of the earth, and who do they sell it 
to? PetroChina.
    That is why I refer to the ESG agenda as the China ESG 
agenda. It does very little to help Americans. It does 
everything to help the Chinese Communist Party, and, again, 
making energy expensive, scarce and government controlled. And 
the numbers show that this ESG agenda, the China ESG agenda, 
has been extremely effective at cutting off capital for 
businesses here in the United States.
    From 2015 to 2021, look at the chart that I provided in my 
written testimony. There has been an 81-percent reduction in 
the number of funds that provide private capital raised for oil 
and gas exploration in this country, a 94-percent reduction in 
dollars raised for oil and gas production. This is just making 
energy more expensive, not only here in the United States, but 
around the world.
    Expensive energy hurts the poor. And today, this energy-
driven inflation caused by ESG and other factors, demonization 
of hydrocarbons, is leading to an increasing number of 
Americans getting their utilities disconnected, as Mandy 
pointed out. Electricity disconnects have increased 30 percent. 
Natural gas cutoffs have soared 76 percent, and globally, 345 
million people are on the brink of starvation. The China ESG 
agenda is not about emissions or pollutions. It is about 
control.
    Thank you for the opportunity to testify. Look forward for 
your questions.
    Mr. Fallon. Thank you. And now, the Chair recognizes Steven 
Moore for his opening statement.

                       STATEMENT OF STEPHEN MOORE

                   DISTINGUISHED FELLOW IN ECONOMICS

                          HERITAGE FOUNDATION

    Mr. Moore. Mr. Chairman, thank you so much for allowing me 
to testify. By the way, in conjunction with the truth-in-
testimony, I do not take government money, and none of the 
organizations I work for take government money. I want to just 
make four or five quick points.
    No. 1, ESG is surprisingly prevalent in the U.S. investment 
industry today. We just completed a study that has been widely 
covered in the Wall Street Journal and others that looked at 
the 40 largest investment firms in America, every company from 
BlackRock to Charles Schwab to Fidelity, Vanguard, and so on. 
And these firms have trillions, literally trillions, maybe even 
tens of trillions of dollars assets under their management.
    And what we found was that of the thousands and thousands 
of shareholder resolutions, these companies are basically doing 
proxy voting based on their clients' money. And out of the 
thousands of proxy votes, we looked at what we consider to be 
the 50 most invasive and the 50 most harmful to the company. 
And by the way, all of these were opposed by the management of 
the companies. And what we found is that in most cases, these 
large fiduciaries were actually voting for these resolutions 
even though they were contrary to the interests of the 
shareholders. That is a big problem and it has to change. So, 
it is highly prevalent, and the majority of the companies are 
doing it. The name of that study, by the way, is called 
``Putting Politics Over Pensions,'' and it is ripping off 
America's savers and America's retirees.
    The second point I want to make is that when fiduciary 
companies are voting for these ESG resolutions, they are 
violating their fiduciary because these are not in the 
interests of shareholders. And so, if you look at my testimony, 
I am not going to get into these studies now, but the 
predominant number of studies show that ESG investing 
underperforms the market. And by the way, this is not a 
controversial point. As the Congresswoman spoke about earlier--
social investing has been around for 50 or 60 years. There are 
pro-life funds, there are anti-pro-life funds, there are pro-
gun funds. There are funds for every single kind of cause. And 
by the way, I am very much in favor of people being able to 
make their own decisions about how they want to invest their 
money. If people want to invest in ESG, I have no problem with 
that whatsoever. I am talking about fiduciaries doing this 
without the knowledge of their clients.
    And so, what we found is that the predominant numbers of 
studies show an underperformance, which means this is costing 
people retirement income. Now, this has to be the case, by the 
way, if ESG funds actually outperform the market, then 
everybody would invest in the ESG funds, right, because 
everybody wants to get the highest returns. And the reason that 
these kinds of funds underperform is very simple because they 
limit the number of companies that you can invest in, and that 
is why they underperform index funds.
    The next point I wanted to make is just that ESG funds are 
really costly to the economy, and this is a point that you were 
making. And I'll just add one statistic to this, which is that 
if you look at what has happened to U.S. oil and gas production 
in the last two-and-a-half years, we peaked out at 13 million 
barrels a day under Trump. Today we are at somewhere between 11 
and 12 million barrels a day even though the price is higher, 
so we should actually be producing more oil at a higher price 
than we would.
    And so, we estimate--I did the study with Casey Mulligan, 
economist at University of Chicago--that we are probably 
producing, thanks to Biden's policies, two million less barrels 
a day of oil here in the United States at $70 to $80 a barrel. 
This is imposing about a $200 billion cost on the American 
economy. Think of that, $200 billion because we are not 
producing our energy here at home.
    And then finally, I just wanted to make the final point 
that all of this is for nothing. The fact is, that if you look 
at the U.S. energy production, and this is a point that you 
made, it is not that we are producing less oil. The world is 
not consuming less oil. The world is consuming the same amount 
of oil. It is just that instead of producing it in Texas or 
Oklahoma or North Dakota or Alaska, we are really stupidly 
getting the oil from Saudi Arabia, from Russia, from Iran, 
Venezuela, and countries that hate us. That just does not make 
a lot of sense to me as a consumer. And so, we need to really 
realize that this is not reducing greenhouse gas emissions or 
pollutions because these countries have much worse 
environmental records than we do. So, all of this is for 
naught, and I hope that the Committee really starts to look at 
how we can solve this problem.
    Mr. Fallon. Thank you, and now I recognize Dr. Shivaram 
Rajgopal for his five minutes.

                     STATEMENT OF SHIVARAM RAJGOPAL

              ROY BERNARD KESTER AND T.W. BYRNES PROFESSOR

                       OF ACCOUNTING AND AUDITING

                        COLUMBIA BUSINESS SCHOOL

    Mr. Rajgopal. Thank you. Thank you to Subcommittee Chairs 
Fallon, McClain, Subcommittee Ranking Members Porter and Bush, 
as well as the other Members of the Committee for the 
opportunity to testify here today on a topic of utmost 
importance--how companies allocate resources, who are they 
accountable to, and how. So, it is an honor to be here.
    My name is Shiva Rajgopal and I am the Kester and Byrnes 
Professor of Accounting and Auditing at Columbia Business 
School. To me, ESG is really about material factors that affect 
future cash-flows and the cost of capital of a firm. So, I 
think of ``ESG'' as a term that covers data that is not 
adequately disclosed by our financial reporting model and by 
our mandated disclosure rules.
    So, let us consider a few examples to illustrate the 
argument. So, climate and extreme weather events already affect 
the cash-flows of insurers, travel companies, tourism companies 
such as cruise lines, agricultural firms, theme park operators, 
energy companies, transportation companies, to just name a few. 
Yet the current reporting rules in the U.S. require no 
systematic disclosure of the impact of such climate-related 
physical and transition risks on the affected firm's future 
cash-flows and cost of capital.
    Now, turning to the ``S'' in the ESG related to workers and 
labor, it turns out that barely 15 percent of U.S. public 
companies even disclose compensation costs in aggregate paid to 
workers, and companies are required, as of now, just to 
disclose the number of full-time employees. We rarely see them 
talk about part-time employees, contractors, compensation paid 
to these workers, let alone important information about 
employee tenure, abnormal turnover, training, gender, age 
composition of the work force, and how much of these operations 
are outsourced or conducted via other contractors. And 
appreciation of the firm's work force would actually enable an 
investor to get a better sense for the corporate culture, the 
quality of human capital in the company, which has been shown 
to be robustly associated with several aspects of value 
creation of a firm, including productivity, ethical behavior, 
compliance, and innovation.
    Now, let's talk about another ``S,'' which relates to the 
taxes a company pays and the grants and subsidies that it gets, 
and the conditions associated with earning of these grants and 
subsidies, such as, say, the minimum number of jobs that a firm 
needs to create for such assistance. Corporate disclosures in 
this area are vague and sketchy at best. In fact, some of my 
research shows that the expected payoff to a dollar of lobbying 
for a firm far exceeds the expected payoff to, say, a dollar of 
R&D investment. Yet there is virtually no disclosure of the 
extent and the scope of lobbying activity that a firm 
undertakes.
    And let us talk a little bit about the ``G,'' or the 
corporate governance of a firm. To me, that describes the 
process of assessing what the CEO has done with the shareholder 
capital, natural capital, human capital, and the taxpayer 
resources entrusted to such a CEO by shareholders, society, 
workers, and taxpayers. However, as mentioned before, the data 
available to assess how well the CEO has delivered a return on 
these sources of capital is often missing or vague. Even CEO 
compensation disclosures do not fully reveal whether 
shareholders actually got the so-called pay-for-performance 
that a lot of proxy statements talk about.
    So, to me, ESG, in essence, is a free market, organic, 
investor-driven movement to ask firms to disclose more 
information about their described factors associated with their 
future cash-flows or cost of capital. In fact, I would argue 
investors would be derelict of their fiduciary responsibility 
to their stakeholders if they did not consider the material 
factors while making that investment decision. Prohibiting 
consideration of material ESG factors simply interferes with 
the provision of data to make asset prices efficient such that 
markets can price these risks and returns. In fact, there is 
evidence to suggest that substantial losses will be incurred by 
the constituents of states such as Texas, where legislation 
that infringes on the public pension's freedom to invest have 
been passed in recent months.
    In closing, I want to reiterate that investors and asset 
managers cannot afford to ignore material financial risks posed 
by overlooking material ESG data that is relevant to 
understanding a firm's future cash-flows and risks of stocks, 
bonds, and other assets. So, thank you again for listening to 
my testimony, and I look forward to your questions.
    Mr. Fallon. Thank you very much to all the witnesses. I now 
recognize myself for five minutes of questions.
    Mr. Moore, when it comes to managing retirements and 
investing, do investors, money managers legally owe a fiduciary 
duty to their clients under Federal law?
    Mr. Moore. So, this is a really important point, and I just 
want to make sure that we are not talking past each other. ESG 
funds are fine. If people want to invest their money in ESG 
funds, Congresswoman, I could not have said it better than you 
did. I mean, it is a free country, certainly if investors want 
to.
    What I am talking about in my testimony is companies like 
BlackRock and State Street voting on these resolutions without 
the knowledge of the clients and without their approval. That 
is a big problem. And that is where the fiduciary duty problem 
arises because they are lowering the return that these 
companies, you know, they have in their retirement fund or 
whatever it might be, so that, I think, is the heart of the 
matter.
    One other just quick thing. When it comes to risk, of 
course there is risk with climate change, but you know what? 
There is a risk of running out of energy, right? I mean, look 
at what has happened in California where you have brownouts or 
blackouts. That risk, you could make the case, is five times 
greater than the risk of what the planet's temperature is going 
to be 100 years from now. So, we have to balance these risks in 
a way that I think is best for the economy and best for the 
investor.
    Mr. Fallon. So, what you are saying is if the person that 
is investing has knowledge that the investment firm that they 
are entrusting their money with, knows about the fact that they 
are using an ESG score, that is not limiting anybody's economic 
freedom, right? But they have to know, and if you do not know, 
it is limiting your freedom.
    Mr. Moore. And that is, frankly, why we did the study we 
did because people do not know and now they do know. And so, if 
you look at our testimony, you can see the companies that were 
the worst in terms of protecting fiduciary duty were companies 
like BlackRock, companies like State Street, companies like 
UBS, and the best were companies like Vanguard, and 
Dimensional, and Fidelity.
    Mr. Fallon. Yes. Ms. Gunasekara, my understanding is you 
were the Chief of Staff for the EPA?
    Ms. Gunasekara. Yes.
    Mr. Fallon. All right. In your opinion, when it comes to 
advancing environmental goals, can we justify the green-at-all-
cost approach that permeates not just the Federal Government, 
but now our financial systems that threaten to wipe out the use 
of our most, really, reliable energy sources?
    Ms. Gunasekara. No, not at all. We in this country, when 
the government essentially gets out of the way and lets U.S. 
oil and gas workers do what they do best, we know how to 
cultivate, refine, transport and deliver energy resources in 
the cleanest, most efficient manner compared to any country out 
there. So, suppressing the type of energy that we actually need 
to live the lifestyles that we have become accustomed to, 
which, as Jason pointed out, has lent itself to massive human 
flourishing, when we suppress those energy resources, that 
demand does not go away, it is just transported typically 
overseas to places like China or India, and Russia, that do not 
ascribe to the same level of environmental standards that we do 
in this country, which ultimately undermines environmental 
progress that we have made over the past few decades.
    Mr. Fallon. Mr. Rajgopal, do you think that ESG scoring is 
consistent?
    Mr. Rajgopal. Say again?
    Mr. Fallon. Do you think the ESG scoring, the agencies are 
consistent?
    Mr. Rajgopal. So, you know, one has to, I think 
distinguish----
    Mr. Fallon. Button.
    Mr. Rajgopal. Sorry.
    Mr. Fallon. I am going to give myself 10 more seconds. Go 
ahead.
    Mr. Moore. Is the red light on, 15 more seconds.
    Mr. Rajgopal. So, one has to distinguish, I think.
    Mr. Moore. You have to move your--up, mic.
    Mr. Rajgopal. Oh, sorry.
    Mr. Fallon. A little closer. There you go.
    Mr. Rajgopal. Thank you. Thank you. So, one has to 
distinguish the idea with ESG the practice. So, you are right, 
the practice of ESG, which is I think what you are alluding to, 
the rating agencies, you know, that is a work in progress for 
sure.
    Mr. Fallon. OK. Yes, because when you look at, like, 
traditional competing rating agencies, like Fitch, and S&P, and 
Moody's, they reach a similar credit evaluation 99 percent of 
the time. But when you look at the large ESGs, they are only--
come up with the same correlative ratings 54 percent of the 
time. So, that leaves a lot to be desired, particularly when 
you are talking about billions if not trillions of dollars at 
stake.
    Work-in-progress scares me, and there is a hell of a lot 
more risk in work-in-progress than it would be when you have 
professional agencies that come up with the same conclusion 
over and over again. And we are talking about folks' money and 
economic freedom and economic security that is of vital import.
    Sorry. I have one more. I am going to yield myself that 20 
seconds from the microphone deal. One quick question. Mr. 
Isaac, you focused much of your work at Life:Powered on telling 
our Nation's energy story, and part of that story is the impact 
that policy has on consumers. What should Congress be most 
worried about when we think about ESG and the future of 
American energy? And if you can do that in 30 seconds or less. 
Thanks.
    Mr. Isaac. Yes. I think energy independence is probably the 
most important thing as we continue to see this demonization 
not only from financial institutions and politicians alike. 
These anti-American energy policies are crushing the least 
among us. As I mentioned in my testimony, we are seeing 
increased number of disconnects from utilities, something that 
1 in 6 Americans are experiencing over the last 12 months, and 
I think that is what policymakers need to focus on. And ESG is 
just this discrimination against American energy producers, the 
most responsible producers on the face of the earth.
    Mr. Fallon. Thank you very much for being quick. I 
appreciate that, and I want to yield to Ranking Member Bush for 
her five minutes.
    Ms. Bush. Thank you, Chairman. St. Louis and I are here 
today because my colleagues across the aisle have convened 
another hearing to demonize ESG. While Republicans called this 
hearing under the pretense the Biden Administration is risking 
hardworking people's retirement funds, research proves that the 
consideration of ESG metrics is beneficial to workers who 
invest their earnings. We know ESG is demonstrably a more 
effective investment strategy for the average worker. Dr. 
Rajgopal, why do you think it is important for ESG metrics to 
be publicly available?
    Mr. Rajgopal. So, as I said in my opening remarks----
    Ms. Bush. Pull it a little closer to you, the mic. 
Straighten it out a little.
    Mr. Rajgopal. At some point, I will get this right. So, as 
I said in my opening remarks, the current reporting disclosure 
model is, in my mind, woefully inadequate. You know, it goes 
back to the earlier conversation about just showing the price 
of a car as opposed to the holistic idea of where the car is 
made, you know, the energy efficiency, et cetera. The idea is 
that these ESG metrics are related to future cash-flows, not 
necessarily current ones. So, think of these as leading 
indicators of what is to come in the future.
    And, you know, going back to the earlier conversation about 
the credit rating agencies and so on, the credit rating 
agencies have a far easier problem to forecast. Will the 
company not pay interest or will it probably stop paying 
principal? The ESG conversation on the other hand, you know, is 
a deeply idiosyncratic, complicated exercise where you have to 
look at a mosaic of factors for the 4,500 stocks out there. 
That is why you do not get the convergence that was referred to 
earlier. And more data, you need a more robust conversation 
about these idiosyncratic factors that help raters, investors, 
institutions, whoever, the free market, to just do its thing 
and figure out what that might mean for future cash-flows and 
risks. So that is why I think we need to have these things 
public.
    Ms. Bush. Thank you. Let me also ask you, Dr. Rajgopal, the 
``S'' in ESG stands for social factors. How does the 
availability of ESG data impact workers across industries?
    Mr. Rajgopal. So, one aspect, an important aspect, as you 
rightly mentioned, is worker data. And again, as I mentioned in 
my testimony, barely 15 percent of U.S. public companies even 
tell you their compensation costs, let alone all the other 
stuff that we are discussing in terms of, say, turnover, 
training, you know, gender composition, age composition, what 
portion of the work force is part time versus full time versus 
subcontracted.
    So, all this, as an investor, one would care about this, as 
I mentioned before, because this tells you about the quality of 
human capital that the firm has. And I think there is no 
dispute that there is a strong association with the quality of 
human capital you have and your outcomes, such as productivity, 
innovation, et cetera, which again affect future cash-flows of 
the company.
    So, you know, worker groups, whoever makes investments 
would simply be better off with this data. Right now, it is 
opaque, sketchy, you know. I would say almost non-existent.
    Ms. Bush. Yes. Thank you for those insights. Corporate 
transparency is a priority. We know that adherence to ESG 
principles protects workers and protects our communities.
    I ask unanimous consent to enter a Washington Post op-ed by 
David Webber on ``Protecting Public Pension Investments.'' Mr. 
Chairman?
    Mr. Fallon. Without objection, so ordered.
    Ms. Bush. In the op-ed, Mr. Webber tells the story of state 
workers who suffered financial harm when their pension funds 
were invested in private sector companies that the state later 
hired to take over the very agencies where these employees 
worked. These workers lost their stable state jobs, earning a 
decent wage and benefits when these private sector companies 
took over. In some cases, the private companies then rehired 
the workers at lower wages with fewer benefits.
    This type of anti-worker privatization has negatively 
affected teachers, school bus drivers, janitors, firefighters, 
and more. My colleagues across the aisle might call these anti-
worker policies good business because these companies showed a 
positive short-term return on pension investments, but good 
business, it should not come at the cost of hardworking 
families in the long run.
    So, Dr. Rajgopal, would you agree workers are undermined 
when their hard-earned money is invested in companies that then 
turn around and take away their jobs?
    Mr. Rajgopal. You know, I again say I am just pushing for 
more data and more disclosures. It is up to them to take 
informed decisions, whether it is investing decisions or 
whether they want to continue working for the firm.
    Ms. Bush. Again and again, Republicans value only the 
corporate bottom line and short-term profits. I am proud to 
support workers by protecting their jobs and their retirement. 
Thank you, and I yield back.
    Chairman Fallon. I now recognize Chairwoman Lisa McClain of 
the Health Care and Financial Services Subcommittee for her 
five minutes of questions.
    Mrs. McClain. Thank you. Just to be clear, Republicans are 
not demonizing ESG. It is a free country. If you want to invest 
in ESG, invest in ESG. I do think we are talking about being 
honest and transparent. I think that is really the gist of this 
hearing.
    So, I would like to start with you, Mr. Isaac. In your 
written testimony, you tell a story about how a Credit Suisse 
pressured a client to make a positive public statement about 
the Paris Climate Accord in return for facilitating their 
transaction. Is that correct?
    Mr. Isaac. Yes. I have got a copy of the actual text from 
the email here that Credit Suisse First Boston was enticing, 
coercing, forcing this business entrepreneur that if they 
wanted to do a business transaction, if they wanted to fund 
another business to create more opportunities to create more 
jobs, that they were concerned about his social media and that 
he needed to tweet some things. And I was most concerned with 
their alignment with Paris. This body, the U.S. Congress, has 
not ratified the Paris Treaty. It is not the law of the land 
here in the United States, but to force an American 
entrepreneur to admit that his company will comply with that is 
just mind blowing to me, but they put it in writing in order to 
complete a transaction.
    Mrs. McClain. So, who is ``they?'' Do we have names that--
--
    Mr. Isaac. This is the Global Energy and Transition.
    Mrs. McClain. But is this a person? I am looking for, like, 
Susie Smith? Do we have a name associated with this, because 
this is amazing to me.
    Mr. Isaac. Yes, it is the Credit Suisse First Boston, I 
would imagine now, former, because of their collapse that they 
experienced, and I do not have a name. It is the chairman of 
Global Energy and Transition.
    Mrs. McClain. I mean, that is pretty aggressive to me.
    Mr. Isaac. Yes. And to list four bullet points of things 
for this entrepreneur to tweet.
    Mrs. McClain. I mean, could you imagine if this was some 
other function other than ESG, we would be going wild right 
now?
    Mr. Isaac. Absolutely. It is bend the knee----
    Mrs. McClain. Yes. Again, I am not really sure that that is 
the fund manager's job, but at any rate, I would like to ask 
another question. Who exactly enforces ESG compliance at these 
companies?
    Mr. Isaac. That is arbitrary. There are multiple different 
companies that do ESG ratings, and as you and Chairman Fallon 
have alluded to, the ratings vary by company. You will see 
Chevron with an A rating from one company, a C, and then an F 
from another.
    Mrs. McClain. Perhaps, do you think it has something to do 
with maybe coercions if they tweet positively or negatively?
    Mr. Isaac. Absolutely. Yes. The climate cartel is at full 
work, and that is why companies like FTX had no board. They did 
not have a governing board, but had a higher ESG rating than 
ExxonMobil, where we know the story----
    Mrs. McClain. Interesting. Do not let the facts get in the 
way of a good story. Are these ESG compliance officers, so to 
speak, is it an internal to the company, or are there outside 
groups that they are coordinating with?
    Mr. Isaac. You look at companies like ISS, the Investor 
Shareholder Services, and Glass Lewis, these are the duopoly of 
proxy voting firms that control over 90 percent of the market, 
have become major ESG promoters. So, these are the companies 
that are actually voting the shares for the largest 
institutional investors, which 19 of the largest 20 
institutional investors are public pensions, and ISS and Glass 
Lewis are voting their shares and aligning with their personal 
ESG political agenda.
    Mrs. McClain. OK. I am going to switch gears for one moment 
because I want to piggyback and stick with the facts because, 
again, return on investment is supposed to be factual. There is 
risk mitigators in there, right? It is not an idea or ideology. 
One of my colleagues earlier said that ESG is a more efficient 
investment strategy. Mr. Moore, would you like to comment on 
that? Because I would think it is the opposite. In fact, the 
data that I show is ESG is not a more efficient strategy. Do 
you have any comments on that?
    Mr. Moore. There are scores of studies. Look, there are 
studies on both sides. But the predominant number of studies 
show that ESG investing, just like any social investing 
technique, reduces return because you are just limiting the 
number of companies you can invest in. And so let me just give 
you one little example.
    Mrs. McClain. Please.
    Mr. Moore. What do you think was the top returning industry 
of the Fortune 500 last year? Oil and gas. Guess what the ESG 
companies did? They divested in oil and gas as their stocks 
went way up. Now, oil and gas is not doing so well this year, I 
mean, so you can always cherry pick the data, but over time, 
these social investment ESG policies reduce returns to the 
shareholders. Look, you know, I cannot tell you how many people 
I have heard from since we did our study saying, you know, 
look, this is my retirement money. You know, I have worked my 
whole life to, you know, maybe buy a home in Florida or Arizona 
when I retire, and this is costing me thousands of dollars. And 
so, people are upset about it, and they are upset that they did 
not even know about it.
    Mrs. McClain. And therein lies the problem: just be honest. 
And I am going to say it again, if you want to invest in ESG 
companies, by all means, you have every right to do so, but let 
us just be honest and transparent. Thank you.
    Mr. Fallon. OK. The Chair recognizes Ms. Brown from Ohio.
    Ms. Brown. Thank you, Mr. Chairman. Once again, we sit here 
in this hearing room wasting our time, our constituents' time, 
and the Nation's time discussing a Republican-manufactured 
crisis. Our last hearing in this Subcommittee was focused on 
the Republican narrative of gaslighting people about a ban on 
gas stoves. And here we are, again, now discussing a real 
Republican attempt to ban information and the freedom to choose 
how to invest your savings. As I said during our last hearing 
on environmental, social, and governance investing, ESG is a 
critical tool that businesses use to make financially smart 
investments. This type of investing emphasizes corporate models 
that are both financially smart and socially good, which is 
truly a win-win.
    Investment companies and asset managers developed ESG 
factors for responsible investing to attract financial backers 
and better assess long-term risk from challenges like climate 
change. ESG is not a liberal conspiracy. It is common sense, 
which apparently is not so common these days. Nevertheless, Dr. 
Rajgopal, why do investors and asset managers want to consider 
ESG factors?
    Mr. Rajgopal. So, your question is how do they consider it? 
How do they consider it? Is that----
    Ms. Brown. And why.
    Mr. Rajgopal. Yes, and why. So, let us kind of go back to 
the fiduciary discussion that we had. As a fiduciary, if there 
is a robust body of signs that raises potential risks, let us 
say climate as an example, at the very least, I think it is 
your responsibility to look at those things. You might decide 
what you want to, but at least you have to look at them. It 
would be the first premise.
    And second, lots of comments have been made about how ESG 
funds underperform and so on. You want to look at specific 
aspects of the ``E'' and the ``S'' and the ``G.'' That is where 
the action is. It is not running regressions of ratings, et 
cetera, on returns. So, if you want to look at ``S,'' quality 
of the work force. If you want to look at ``G,'' are CEOs 
overpaid? What is the composition of the board? How many 
insiders do you have? When was the board appointed? If you want 
to look at specific aspects of ``E,'' we can talk about 
physical and transition risks. So that, to me, is the way to 
think about the investments you have, and look at the mosaic of 
factors. To me, it is no different from, say, accounting risk.
    One of the issues that is often not considered carefully in 
this ESG, it does not correlate to performance debate, is that 
ESG is a lot about tail risk. What does tail risk mean? To me, 
it is like accounting fraud. Maybe 5 percent of your portfolio 
companies probably have some probability of going through an 
accounting fraud, but if they do, it is going to wipe out the 
principal and that principal is going to wipe off years of 
returns. So, think of ESG as a way to think about the tail risk 
associated with future cash-flows of the stocks that you hold 
if you are a fiduciary. So hopefully, that gives you some 
granularity in----
    Ms. Brown. That is helpful. So yes or no, do you think the 
use of ESG data is politically motivated?
    Mr. Rajgopal. It can be, but it need not be.
    Ms. Brown. Yes or no, would you say that the banning of ESG 
data is politically motivated?
    Mr. Rajgopal. I think it is regrettable. We should just let 
the free market decide what it wants to. Markets cannot be 
efficient if you stop access to data.
    Ms. Brown. Thank you. Well, unfortunately, my colleagues on 
the other side of the aisle throw out their support of free 
market principles when it does not fit their narrative. 
Apparently, recent abortion and book bans have not satisfied 
Republicans, so now they are moving to ban basic logic and data 
and interfering in the private market. It is truly 
disheartening to see my colleagues do everything they can to 
drag even the most commonplace issues into their manufactured 
culture wars. So let me close by saying this. Transparency, 
information access, facts, and truth are not conspiracies or a 
political agenda, and with that, I yield back.
    Mr. Fallon. The Chair recognizes Mr. Grothman from 
Wisconsin.
    Mr. Grothman. Yes. We are focusing here on funds, but 
obviously the funds are made up of many individual businesses, 
right? And I wonder if there is a data base or a place where I 
could look up the ESG scores on, say, any publicly traded 
company. Is that a public thing, or do the scores vary by 
mutual fund by mutual fund?
    Mr. Isaac. Yes, there are. The scores are going to vary, 
but I know Schwab has a tool that shows ESG ratings. We had a 
piece published within the Texas Public Policy Foundation that 
showed that an American business that owns minerals--that is 
all they own is minerals in the United States--actually had a 
lower ESG rating than three Chinese companies, one of which has 
``coal'' in the name. The China Coal Energy Company has a 
higher ESG rating than an American----
    Mr. Grothman. Why is that?
    Mr. Isaac. It is just because I believe it is political in 
nature. And I would imagine this Chinese communist-controlled 
company has probably signed on and said that they are going to 
meet the terms of the Paris Accord while they have their 
fingers crossed behind their back.
    Mr. Grothman. OK. I see guns is one of the things. Does 
that include retail or just manufacturing of guns?
    Mr. Isaac. Manufacturing and retail, you have got both of 
those that are being targeted by financial institutions that 
are denying access to capital and insurance.
    Mr. Grothman. So, in other words, there are individual 
retailers out there who get a higher ESG score if they do not 
sell guns?
    Mr. Isaac. Correct, and then they are losing access to 
credit card processing. There are companies out there that will 
not allow credit card transactions to take place at retail gun 
stores.
    Mr. Grothman. OK. Well, that is an interesting thing. It 
looks like there is a lot of diversity. I take that that 
diversity means employees' diversity by race, presumably 
diversity by gender, diversity by sexual preference. Is that 
so?
    Mr. Isaac. I would say that leans heavily into the ``S'' in 
the ESG. Yes, and DEI is a close cousin of ESG, if not directly 
related.
    Mr. Grothman. OK. So, a company that gets a higher score is 
more likely to discriminate against, I do not know, 
discriminate against certain ethnic groups, I will put it that 
way.
    Mr. Isaac. Yes, and basically to have policies that they 
are going to employ people not based on merit.
    Mr. Grothman. OK. Is there any reason why these companies 
are not publicized? They think they make themselves more 
popular. I mean, I would like to know if companies are hiring 
or promoting not based on merit. Is that something that anybody 
is making an effort of getting out there?
    Mr. Isaac. I cannot recall. It seems like there are a 
couple of companies out there. Maybe 2ndVote Advisers is one 
that is doing a list. And I know there is some other lists. I 
will be happy to followup with some information on that.
    Mr. Grothman. OK. And I know some of the things in the 
notes here imply that some of these policies will and may be 
popular with the fringe element in our society, maybe popular 
with wealthy people who do not have to worry about what their 
rate of return is, that overall, a lot of these policies that 
the companies have to implement are unpopular with the American 
public. Is that true?
    Mr. Isaac. Absolutely. Yes.
    Mr. Grothman. Could you rattle off a couple of examples?
    Mr. Isaac. Well, I mentioned in my opening remarks about 
the president of Sri Lanka. When he fled his country, he was a 
wealthy individual and was able to take a government plane, and 
where did he take it? He took it to Singapore, a place with the 
second highest per capita CO2 emissions on the face of the 
earth. But here he is pushing in, he is wealthy, he has got 
access to military equipment, he can go wherever he wants to 
go. He didn't go to Malawi, which is at net zero. They were 
suffering a cholera outbreak at the time. He went to one of the 
wealthiest countries with high CO2 emissions, that has no goal 
and will never meet CO2 or net zero CO2. You have got other 
people, Al Gore, John Kerry, and others, that fly around in 
private jets and profess----
    Mr. Grothman. Well, he is just a hypocrite. We all know 
that, the millionaire, the limousine liberal. I mean, I hope 
people are familiar with that ilk. I guess the question that I 
am looking for here, though, are there any large companies 
where you could go through and say that you are hiring not 
based on merit, you are rewarding a company that won't sell 
guns, we, on energy front, we are rewarding people who harm 
American energy? Is there a place where these companies are 
easily accessible, and we could publicize them?
    Mr. Isaac. I know there are some public records of that, 
and I'll just have to followup with the specific lists and 
locations of that list.
    Mr. Grothman. And one other thing, with regard to 
discrimination, with pride, discrimination on the basis of 
race, which is all illegal, have these companies who pride 
themselves on this discrimination, do they ever open themselves 
up to lawsuits, or is this something the Department of Justice 
or EEOC ought to be looking at?
    Mr. Isaac. Yes, I believe that the New York City pension 
fund is under lawsuit from some of its pensioners because of 
poor performance, and you----
    Mr. Grothman. No, not poor performance. I am saying the 
company that gets the high ESG score, if they are getting a 
higher ESG score because they pride themselves on 
discriminating against White people.
    Mr. Fallon. Sorry. The gentleman's time is expired.
    Mr. Grothman. OK.
    Mr. Fallon. The Chair recognizes Ms. Porter from 
California.
    Ms. Porter. Dr. Rajgopal, first, can you straighten your 
microphone out? Let me just be very clear. Bend it like this so 
it is dead straight toward your mouth. Thank you.
    As far as I can tell, and I am really on the struggle bus 
here, what Republicans seem to want is they do not want 
companies or investment managers to use ESG. Why?
    Mr. Rajgopal. Ask them. I do not know. I would imagine, as 
I said earlier, if there are signals that inform your view of 
future cash-flows and risks, as a fiduciary, you would actually 
fail in your responsibility if you did not look at those 
signals.
    Ms. Porter. Right. So, I mean, investment managers have 
fiduciary duties to make good investments. If they find ESG 
useful, then they find ESG useful, and if you disagree with 
them and you think they are mismanaging your money, sue them. 
What am I missing here?
    Mr. Rajgopal. Or shed the stock, you do not even have to 
sue them, right? I mean, if you have a view that, just shed the 
stock, make money, you can be an activist, right? That is how 
capital markets work, and that is where the discipline comes 
from.
    Ms. Porter. Right. So, I mean, I am really struggling here 
to understand what Republicans want to have happen. From your 
understanding here, it seems like what they want is they want 
companies to do things that they like. I, too, by the way, 
would like companies to do things that I like, and I sometimes 
choose to invest in companies whose practices I like more. But 
Ms. McClain, my colleague on the other side of the aisle, is 
saying that if companies want to use ESG, they should be free 
to do it. Did you hear her say that?
    Mr. Rajgopal. I thought so, yes.
    Ms. Porter. Then what is the point of this hearing? I, too, 
I am with Mrs. McClain. I think companies should be free to 
decide for themselves whether ESG practices are beneficial to 
their bottom line and their business model and help them 
attract customers or do not. I, too, think that asset managers 
should be free to decide that ESG data helps them make good 
valuation decisions and good investment decisions, and if they 
do not, they should be able to ignore it. I cannot believe this 
is part two when part one was actually the stupidest hearing I 
have ever been to, and now we are having a part two. Please, 
God, let there not be a part three.
    Dr. Rajgopal, is it better for pension fund managers to 
have more options for investing people's retirement savings, or 
is it better if they have fewer options?
    Mr. Rajgopal. More, obviously.
    Ms. Porter. What is the pension fund manager's primary 
responsibility?
    Mr. Rajgopal. To make sure that they can deliver a return 
commensurate with the pension benefits that have actually been 
promised to their workers.
    Ms. Porter. Great. Will limiting pension fund managers' 
investment options increase retirement savings?
    Mr. Rajgopal. Not that I can think of.
    Ms. Porter. And by the way, you are not just thinking about 
it. The Kansas Division of Budget did a study. They found that 
limiting pension fund managers' investment options would cost 
the retirement system $3.6 billion in reduced returns over 10 
years. When we cutoff companies and asset managers from 
choices, investors lose money. We are sacrificing the freedom 
to invest, and we are all poorer. We are poorer because we have 
fewer choices, and we are literally poorer because we have 
lower returns.
    In 2021, the Texas state government passed a law 
prohibiting municipalities from signing loans with banks that 
they believe boycott fossil fuel companies, I believe, also 
guns. Is it better for municipalities to have more options for 
loans or fewer options for loans?
    Mr. Rajgopal. It is a simple supply demand kind of issue. 
If you cutoff a few suppliers of a product or service and if 
demand stays constant, the price of their good or service goes 
up.
    Ms. Porter. Thank you. I yield back. I literally am out of 
ideas here, Mr. Fallon. I appreciate the extra time.
    Mr. Fallon. The Chair recognizes Ms. Norton from 
Washington, DC.
    Ms. Norton. Thank you, Mr. Chairman. This hearing 
highlights the partisan divide over what information investors 
should have access to when making financial investments. I 
think we all understand that. My Democratic colleagues and I 
believe that investors should be free to make their own choices 
using available data. We think workers seeking to invest in 
their futures should have the information they need to make 
evidence-based decisions.
    My Republican colleagues want to restrict investors to 
certain types of investments that show short-term profitability 
by withholding data on the long-term financial sustainability 
of a company. The issue at stake today is whether individuals 
and families will have the freedom to invest responsibly by 
considering all relevant factors in making investment 
decisions, including environmental, social, and governance 
principles. Mr. Rajgopal, how does considering ESG offer more 
choices to investors?
    Mr. Rajgopal. So, if you were to just go by what an income 
statement or a balance sheet or the footnotes of a financial 
statement tell you, you would perhaps not have a full 
appreciation for all the risk factors related to the future 
sales, future costs, and future earnings of a company. So that 
is what ESG gives you.
    Ms. Norton. Well, Mr. Rajgopal, would you agree that 
restricting the consideration of ESG data also restricts the 
ability of investors to make choices?
    Mr. Rajgopal. I fully agree.
    Ms. Norton. During the last ESG hearing, Illinois 
Treasurer, Michael Frederick, made a compelling case that 
short-term profit should not necessarily be the principal 
factor for making investment decisions. For example, Purdue 
Pharma's financial returns showed a very profitable company 
earning billions of dollars. Purdue, however, eventually went 
bankrupt because they made those profits by manufacturing an 
opioid epidemic resulting in numerous lawsuits and contributing 
to hundreds of thousands of deaths across this Nation. The 
inherent risk in a company that sells a product that kills a 
considerable percentage of its consumers through drug overdoses 
seems like a very relevant factor to consider for making 
investments. If Republicans had their way, investors would not 
be able to consider such risks.
    So, Mr. Rajgopal, when Purdue Pharma filed for bankruptcy, 
how did that affect its investors?
    Mr. Rajgopal. They lost all their money. They lost their 
principal.
    Ms. Norton. That is clear and simple. Mr. Rajgopal, should 
asset managers have been able to choose whether to consider the 
inherent risks associated with investing in Purdue because of 
the opioid epidemic?
    Mr. Rajgopal. Absolutely. I mean, any good analyst should 
have asked these questions, yes.
    Ms. Norton. Well, Democrats are for transparency and 
against limiting what data families and investors can consider 
in investment decisions. I yield back the balance of my time.
    Mr. Fallon. The Chair recognized, Ms. Stansbury--oh, there 
she is, perfect timing--from New Mexico for her five minutes.
    Ms. Stansbury. Thank you, Mr. Chairman, and I want to say 
thank you to all of our witnesses for being here today. I am 
delighted to have a second opportunity today to talk about 
sustainable investing. But I do have to say that I am a little 
perplexed about why we are having exactly the same hearing that 
we had just four weeks ago. And I think what is particularly 
strange to me about this hearing is that we already established 
a few weeks ago that the topic that we are here to discuss 
today and the attacks on ESG investing are wildly out of step 
with the American people, with American corporations, with the 
market, and with our basic freedoms as Americans.
    You know, I think it is clear to say that, and I think we 
have heard today in the rhetoric, that this is yet another 
crusade and the culture wars against American freedom, but, you 
know, quite strangely against the market itself. And what I 
find particularly strange about this conversation is that over 
63 percent of American voters actually directly oppose any kind 
of government interference in investing strategies, and the 
vast majority of Republicans oppose it as well.
    And, you know, when you look at the bigger picture, when 
you look at what the American people are actually asking 
Congress to do, asking businesses in the private sector to do, 
almost 70 percent of Americans are in support of actions to 
address climate change, to transition to a clean energy 
economy. And for our younger Americans, for young people, they 
are two-and-a-half times more likely than older generations to 
say this is their No. 1 issue. So, why are we having a second 
hearing on this topic when we have already established that it 
really has nothing to do with anything that the American people 
want us to be working on?
    But I think it is a good opportunity to talk about the 
things that we do care about, which is climate action. That is 
what the American people are asking us to do. And in fact, that 
is what Democrats did this last year when we passed the 
Inflation Reduction Act, which we have said time and time again 
is not only the most significant investment in climate action 
that this country has ever taken, it is the most significant 
action on climate change that any country has ever taken in the 
history of the world. And that is why the President went to bat 
to protect the Inflation Reduction Act last week when 
Republicans threatened to tank our economy over the debt 
ceiling. So, it is just completely outrageous to me that we are 
here talking about this once again.
    But I think the other aspect of all of this that I find 
particularly troubling is the veiled commentary about wokeism 
as it applies to issues of diversity and inclusion because what 
we are actually talking about is women and people of color 
participating in the board room, being in leadership positions, 
having meaningful jobs, investing in companies who care about 
that. Why wouldn't we care about that? Do we think that our 
Fortune 500 companies are actually struggling right now with 
retaining the kind of historical leadership that they have had? 
No, they are not. In fact, only 30 percent of Fortune 500 
companies have members that are women, and their boards are 
disproportionately White and non-people of color compared to 
the rest of the country.
    So, for those of you who are opposed to ESG and opposed to 
diversity, you know, I think we have a important message here 
to say, which is, thankfully, the American people and American 
businesses disagree. And not only do they disagree because it 
is the right and ethical thing to do, it is also good for the 
bottom line because more diverse businesses, more diverse 
boards actually lead to more successful businesses. So, as a 
factor in investing, it is not only important to advancing 
social justice and equity in our society, it is also a factor 
that we have to be considering when we are making investments 
and our fiduciary responsibilities.
    So, we have heard a lot here today, but, Mr. Rajgopal, I 
want to thank you for being here. Can you please just help us 
drive home the point here? Tell us why investors and businesses 
take ESG into account, and why is ESG important not only for 
advancing our goals as a society, but also for investing.
    Mr. Rajgopal. So, as I have said, you know, quite a few 
times, ESG simply gives you a richer toolkit of signals and 
risk factors that might affect a firm's future cash-flows and 
risks. Just a very quick comment on the diverse board's idea. 
One of the big issues with boards is groupthink, and, you know, 
by and large it becomes socially very difficult for a board 
member to question a CEO because the elephant in the room is 
usually left out. The hope is that people with diverse life 
experiences, even if, you know, 10 or 15 percent of their 
groupthink fell, I think, you know, that would actually add to 
corporate accountability, governance, and actually release more 
firm value.
    Ms. Stansbury. Thank you. And, you know, just in 
conclusion, I want to say it is very clear Americans want 
climate action. They want sustainable investing. They want 
diverse work environments and leadership, and the American 
people want their freedom. And so, I appreciate all of you for 
being here today and those of you who are doing this important 
work. And with that, I yield back.
    Mr. Fallon. The Chair recognizes Ms. Balint from Vermont.
    Ms. Balint. Thank you, Mr. Chair. Earlier in the hearing, 
one of my colleagues went out of her way to say this hearing is 
not about demonizing ESG and that, in fact, we are just here 
really to get to the truth. And so, I just wanted to go through 
some of the language that was used by some of the witnesses 
earlier. We have got words like ``infiltrated,'' 
``weaponized,'' ``collusion,'' ``cartel-like, conspiracy.'' 
What else do we got here? ``Force compliant,'' ``climate 
cartel,'' ``wrecking ball,'' ``coercive.'' Yes, these are 
really neutral terms. We even had ``anti-American'' and ``anti-
capitalist,'' ``driving the woke capitalism.'' These are not 
neutral terms. These are not neutral terms.
    So, like my colleagues have said, this is a colossal waste 
of time. We have already been here before. We have already 
established that if we, in fact, believe that we live in a free 
society and we have the opportunity to make investments, we 
should have all the information that we need to make those 
investments, and we should not be interfering with that. So 
that has already been established.
    And, you know, I stepped out of the hearing to go visit a 
different hearing for a little while, and I just have a 
question. I apologize. I do not know exactly how you say your 
name. Is it Gunasekara? Can you pronounce that?
    Ms. Gunasekara. Gunasekara.
    Ms. Balint. Thank you. Gunasekara. I was looking at some of 
the materials you supplied here. And one of the things that you 
said in your information here that you provided was that the 
dangers of ESG include promoting gender transitions for 
children. And I want to know, do you really believe that 
garbage?
    Ms. Gunasekara. It is not about believing. It is a matter 
of fact.
    Ms. Balint. Oh, so you believe that investing strategies, 
it is weaponized to support and promote gender transition for 
children. Is, essentially, that what you are saying, or do you 
just use it as another opportunity to beat up on children? So, 
do you believe this?
    Ms. Gunasekara. I am not the one beating up on children. It 
is the people who are promoting gender transition in children 
that are potentially harming them. If you just walk into----
    Ms. Balint. Well, so let me tell you, if I could, let me 
tell you where I was, where I stepped out, and this is why I am 
bringing it up. I stepped out to sit down with parents of trans 
kids from states that have come after their kids. And now their 
kids cannot get the level of care that they deserve and need. 
And they literally said, when you leave this room, could you 
please, the next time you are in a room with someone bringing 
up yet again our children and our families as some kind of 
boogeyman, that you will actually stand up for us. And 
literally, I did not think it would take less than a half hour, 
I left that hearing, here I am. I did not know I would have 
such an opportunity.
    But it feels like every single hearing that I am in, 
whether it is in Oversight, or whether it is in Budget, or 
whether it is in a subcommittee, somehow the witnesses find a 
way to bring trans children into whatever conversation we are 
trying to have here. And all I will say, before I finish is, if 
you are a parent or you know parents that you love, I want you 
to think really carefully about whether you think those parents 
are making decisions for their children that are not in their 
children's best interest. That is what we are talking about 
here. I do not think it has any place in this hearing on 
investments to once again be beating up on Americans and their 
children. I yield back my time.
    Ms. Gunasekara. I do not think it has any place in 
investing, and, frankly, the problem is this is not about a 
choice. This is----
    Mr. Fallon. Yes. OK. I got it.
    Ms. Balint. I yield back my time. My time.
    Mr. Fallon. The Chair recognizes Ms. Lee.
    Ms. Lee. Thank you. We have heard a lot about how pointless 
a hearing this is, again, so much so that I would just like to 
quickly point out that the other side of the aisle that called 
the hearing did not even bother to show up, but we are here. 
So, I guess we will carry on with the hearing so as to not 
waste your time as much as our time is being wasted here.
    But we are currently facing a climate crisis, right? That 
is not an opinion, it is a fact, and we cannot just sit around 
and do nothing though. Sometimes we do worse to nothing. 
Propping up the fossil fuel industry with these fabricated 
anti-ESG policies, or whatever acronym we are going to use, is 
actually worse than doing nothing. It is harmful to Americans' 
health, their quality of life, and retirement funds. Our future 
is at stake, and instead of holding a hearing on that actual 
real crisis, we are wasting our time again on this nonsense.
    We heard in the last hearing how vital it is to look at the 
big picture for investments and that long-term growth is the 
ultimate goal. The anti-ESG policies do nothing more than force 
blinders on investors and prevent them from considering 
legitimate risk factors. This past February, a Norfolk Southern 
train derailed just outside of my district in neighboring Ohio, 
causing hazardous chemicals to be released into the air and the 
soil and water in East Palestine. The EPA has since issued an 
order directing Norfolk Southern to pay EPA's response costs 
and has filed a complaint, along with the U.S. Attorneys' 
Office, against the company, seeking penalties and injunctive 
relief.
    Dr. Rajgopal, will any potential imposed penalties by the 
EPA affect the bottom line of Norfolk Southern?
    Mr. Rajgopal. No. Most penalties tend to be fairly small 
compared to the social laws imposed by the company, 
unfortunately. So, I would say it is probably a blip on the 
stock price, if anything. Not even a blip.
    Ms. Lee. Why is it so important for asset managers to be 
able to consider factors, however, like climate change, and to 
make investments in clean energy technologies when making 
decisions?
    Mr. Rajgopal. So, let us go back to the BlackRock, 
Vanguard, State Street idea. These are so-called universal 
owners, meaning they hold the stock for 20-30 years until the 
stock gets probably displaced from the index. So, if the firm 
misses a quarter, they are not going to sell the stock. So, 
they have to worry about, you know, factors that might affect 
the future cash-flows in the stock 10, 15, 20 years out. That 
is why you need to have a conversation about climate risk.
    Ms. Lee. Thank you. Republicans want us to look the other 
way to ignore when a company is poisoning our ecosystem. 
Banning ESG investing is the opposite of doing responsible 
investing, and why is that? What is motivating Republicans to 
create a problem out of nothing? I think we can find the answer 
right here on our panel of witnesses. The Heritage Foundation, 
Texas Public Policy Foundation, and Independent Women's Forum 
all get their funding from the fossil fuel industry.
    Dr. Rajgopal, why do you think the fossil fuel industry 
would fight so hard against ESG factors being considered in 
investing?
    Mr. Rajgopal. Well, changing business models is very hard. 
So, if you ask an oil and gas company to suddenly become or 
think about a different line of business, the history in 
corporate America of companies changing course is not very 
good. Blockbuster had a chance, I think, to buy Netflix twice, 
still passed on that, and I can go on and on. There is Xerox. 
There is Kodak. There are so many, so change is hard.
    Ms. Lee. Let me just add that not only is change hard, but 
change is, in fact, inevitable, right, whether it is hard or 
not. Current fossil fuel assets are facing an estimated $1 
trillion loss over the next 15 years. Their need for a paycheck 
is apparently more important than ensuring our planet is usable 
for the next generation. I came to environmental justice not 
through education, but through necessity. Pittsburgh has some 
of the worst air quality in the Nation on any given day. 
Allegheny County, specifically, the Mon Valley where I grew up, 
suffers from some of the highest rates of asthma, of cancer, 
and of other respiratory illnesses. We see corporate polluters 
sacrifice the health and well-being of our communities for 
their own financial gain over and over. Yet, when we want to 
consider the environmental impacts in how we invest our money, 
they lobby and they throw money around to stop us. Every person 
deserves clean air and a livable future.
    My Republican colleagues need to wake up and get with the 
majority of Americans who are demanding action on climate 
change. I yield back.
    Mr. Fallon. The Chair recognizes Mr. LaTurner from Kansas.
    Mr. LaTurner. Thank you, Mr. Chairman. Thank you all for 
being here.
    When President Biden introduced his new ESG rule earlier 
this year allowing fund managers to invest American's 
retirement savings into ESG funds without their knowledge, the 
House and the Senate took bipartisan action to block this 
reckless proposal from moving forward. Unfortunately, the White 
House did not get the message. President Biden used the first 
veto of his tenure to give large financial institutions the 
ability to advance his political agenda, which the vast 
majority of Americans would never endorse at the ballot box, 
through forced investment, skirting due process.
    The truth is, most Kansans do not want any part of 
President Biden's ESG agenda, much less with their hard-earned 
retirement savings at stake, and why would they? The ESG 
movement forces financial entities and investors to ignore 
real-world fiscal value for the sake of pie-in-the-sky climate 
change initiatives. Does a bank comply with ESG practices or 
prioritize as they should delivering value to their 
stakeholders?
    Energy was the sole sector in the S&P 500 to rise last 
year, but ESG-aligned funds which spurned fossil fuel companies 
by design unanimously underperform the S&P 500. Despite this 
reality, my colleagues across the aisle seem to be just fine 
with policy which conditions behaviors of our financial 
institutions upon arbitrarily contrived ESG scores and puts 
woke climate change policies over the financial security of 
hardworking Americans.
    Mr. Moore, the Census Bureau estimates 25 percent of 
Kansans will be 60 or older by 2030. Retirement funds 
constitute nearly half of mutual fund assets nationwide. Can 
you briefly elaborate upon the financial liabilities my 
constituents' golden year savings are exposed to under the 
Biden Administration's ESG standards?
    Mr. Moore. Congressman, like I outlined in my testimony, 
the preponderance of the studies show that ESG investing 
reduces investor return. It reduces the value of the fund. Not 
hugely, but it does. And so, someone who has put a whole 
lifetime savings, maybe quarter million or half a million 
dollars in, you know, over the course of their 30 or 40 years 
of work, you are talking about reducing, you know, perhaps 
$10,000 or $20,000 the value of their lifetime savings, and 
that is a real cost to retirees.
    Now, I think one of the things that has frustrated me a 
little bit about this hearing is that we keep talking past each 
other. I do not think anybody in this room is against ESG 
investing. I mean, are you? Are you? We are just saying that 
you cannot force people or have them in ESG funds when they do 
not even know about it, when it is being done without their 
knowledge. And that is what a lot of these firms are doing, and 
that is what the Biden Administration requirements are doing. 
They are basically saying, you have to get a lower return on 
your investment.
    Look, I have a big problem because when I talked to 
clients, you know, who are, people who are clients with these 
firms, they say, look, I do not want to save the world. I do 
not want to save the whales. I just want to have a good 
retirement income. I worked my whole life, and that is what 
they deserve. And, frankly, these firms do have a fiduciary 
duty to provide them the highest return possible.
    Mr. LaTurner. I am going to stick with you. Two companies 
control over 90 percent of all proxy advisory services. Do you 
harbor any antitrust concerns over their combined market share?
    Mr. Moore. I am sorry. I missed that.
    Mr. LaTurner. It is OK. I am talking about antitrust 
concerns over combined market share when we are talking about 
Glass Lewis and ISS control over 90 percent of all proxy 
advisory services. Anyone can comment on that if they would 
like.
    Mr. Moore. Well, I do not believe in antitrust, but I do 
believe we need a market solution to this. We need to have 
another firm out there that presents a more free-market review. 
When we graded, yes, we graded the top 50 money management 
firms.
    Mr. LaTurner. Yes.
    Mr. Moore. But we also graded the ISS, and what is the 
other one?
    Mr. LaTurner. Glass Lewis.
    Mr. Moore. Glass Lewis, they got a D-minus and an F-minus. 
They are recommending the firms that they vote for all of this 
ESG stuff. So, we probably need an alternative because they are 
not really advising these firms in a way that maximizes 
shareholder value.
    Mr. LaTurner. To your personal knowledge, are climate 
change activists using the threat of political action to 
pressure banks from lending to certain energy and industrial 
sectors like the fossil fuel industry?
    Mr. Moore. Here is the point about this. The U.S. economy 
cannot operate without fossil fuels. So, the idea that we are 
going to, you know, eliminate fossil fuels over the next 20 or 
30 or 40 years is extraordinarily economically dangerous. And I 
mentioned earlier that, you know, there is a state that is 
trying to do that. That is California, and California has had 
brownouts, blackouts. Even my friend here in Texas, you have 
problems because of some of this, you know, these environmental 
initiatives that are moving away from not just oil and gas, but 
nuclear power. I mean, that makes no sense.
    And by the way, the single factor that has reduced carbon 
emissions the most is not this Inflation Reduction Act. The 
thing that, by an order of magnitude, that has reduced carbon 
emissions has been shale gas. Shale gas is like a wonder fuel. 
It has dramatically reduced greenhouse gas emissions.
    Mr. Fallon. The gentleman's time has expired.
    Mr. LaTurner. Thank you. I yield back, Mr. Chair.
    Mr. Fallon. The Chair recognizes Chairman Raskin.
    Mr. Raskin. Mr. Chairman, thank you very much, and I feel 
with this last round of statements we have reached some 
enlightenment here. Mr. Moore stated that he was not opposed in 
any way to ESG investing or ESG companies. He invited his 
fellow panelists to disagree with him, and they appeared to 
assent to it. He said he is only opposed to affirmatively 
forcing people to invest in ESG, but, of course, that does not 
happen anywhere.
    The Department of Labor rule, which I think is the target 
of their attack, does not impose a mandate on anybody, but 
permits fiduciaries to consider responsible investing factors 
if such factors are shown to be prudent and consistent with 
fiduciary principles. So, the Department's rule just represents 
a return to neutrality, precisely what the anti-ESG people do 
not want in the states. They want to try to exclude ESG 
companies from consideration.
    Representative McClain said at the beginning that, well, if 
investors and asset managers are going to be able to consider 
environmental and social and governance factors, a company 
could decide to just make its decisions based on abortion. But 
what do you know, this is America, and we have got economic 
freedom, and you go online and you can find the Catholic 
investment portfolio which excludes abortion. You can find the 
Timothy Plan which excludes abortion. You can find Ave Maria 
Mutual Funds. That is the marketplace.
    So, if you think that your asset manager is violating your 
rights somehow, you obviously have the right to exit. You have 
the right to have some kind of shareholder proxy election about 
it, or you can sue them. You can bring derivative shareholder 
litigation. Are there examples of any lawsuit where 
shareholders have said you pulled the wool over our eyes and 
you decided to take into account more data about environmental 
and social governance factors that we want you to consider? 
Does anybody have any cognizance of any lawsuit like that where 
someone has won?
    I mean, so I am with my colleagues who are just baffled 
that we are having not one but two hearings. And I hope we are 
not going to have a third hearing and then we will have no 
Republicans show up at all because I think they have absolutely 
abandoned the field here because they are going up against 
market freedom, consumer sovereignty, environmentally conscious 
and socially conscious decision-making that people want and 
where the market is taking us. That is where we are right now.
    Well, in 2022, Morningstar surveyed 500 global asset owners 
controlling $32 trillion, and they found that 85 percent of 
those 500 see ESG factors as material or even essential to 
prudent financial investment policy. And that makes perfect 
sense because it has been shown that investments that consider 
ESG data offer greater long-term resilience and lower risk than 
investments that do not. I mean, if someone came to you in 2016 
or 2017 and said, I have got a great pharma investment for you 
with this great company called Purdue, it is producing 30 
percent, 40 percent, 70 percent, 80 percent returns in the last 
couple quarters, would you want to know that their business 
model was getting people addicted to drugs? It is not just that 
it is socially pernicious. Maybe you do not care about that. 
You say all you care about is the financial bottom line. But if 
you care about your financial bottom line, you are going to 
want to know if that company is going to go bankrupt because of 
its socially predatory practices.
    Same thing with--take the Massey Energy Company in West 
Virginia. Someone said to you, invest in Massey Energy. They 
are getting staggering profits in 2007, 2008, before the Upper 
Big Branch Mine disaster which took the lives of 29 workers. 
And someone said, well, why don't you consider the fact that 
they have got hundreds of mine safety violations and OSHA 
violations? And then someone says, well, no, you cannot do 
that. You cannot take into account the social factors are the 
environmental factors. Just look at the bottom line. That would 
be a ridiculous way to invest, but that is precisely what we 
are being invited to endorse today. Look only at the money and 
not include the ESG factors, which are just data, more data for 
the investment managers to figure out whether it is a good 
investment or a bad investment.
    So, these ham-fisted efforts of the carbon kings are 
projected to dramatically raise costs for state and local 
governments by tens or hundreds of millions of dollars 
annually.
    [Chart]
    Mr. Raskin. If you could just take a look at this. A 
Sunrise Project study estimated the cost for six southern 
states, if they pass legislation limiting responsible 
investing, these bills would pull state funds from investment 
managers if officials deem their investment strategies are 
adverse to certain industries, most prominently, of course, 
fossil fuels and the firearm industry, which are the ones that 
have gotten this whole anti ESG crusade going.
    I ask unanimous consent to submit this analysis to the 
record, Mr. Chairman.
    Mr. Fallon. Without objection, so moved.
    Mr. Raskin. Thank you very much. I yield back.
    Mr. Fallon. Thank you. The Chair now recognizes Ranking 
Member Bush for a close.
    Ms. Bush. Thank you and thank you to all the witnesses for 
being here today and to the Democrats who showed up two to one 
to this hearing that was called by the Republicans. Thank you 
so much.
    And let me also say, it is astounding how often we hear 
about wokeness, wokeness, wokeness from people who have no idea 
what ``woke'' actually means and where it stems from. But let 
me just say, as Black folks who stood up to say, that no more 
will we allow these injustices to continue to happen on our 
communities. We spoke up, and I can speak to it because I am 
one of those folks that was on the ground for more than 400 
days after the killing of Michael Brown. When that came about, 
we said we woke up because we will not allow anyone else to do 
this to us without us fighting back.
    And so, when you say, ``I am anti-woke,'' when you talk 
about wokeness, you are saying ``I am anti-Black and I do not 
want Black people to speak up for themselves. I do not want 
equality and justice for Black folks.'' So, I say to those that 
say wokeness, wokeness, wokeness, ``we are anti-woke,'' this is 
not wokeness what we talked about in here, and you should be on 
the side of folks who are woke because we are saying no more 
oppression against our community.
    So, whatever else is being thrown around, unless you are 
saying ``I am racist, White supremacist, and I am bigoted,'' 
stop talking about wokeness. And you cannot tell me that I am 
wrong because I am from the very movement where this came 
about. Do not let a fascist tell you what being woke means.
    Now, responsible investing, which has nothing to do with 
wokeness, depends on ESG data to facilitate planning for long-
term challenges, requiring firms to disclose more data about 
their risk and returns and how that helps to protect our future 
by investing in climate resilience and clean energy. And this 
is good for our planet, it is good for business.
    Climate-and extreme-weather-related events already affect 
both small and large businesses every single day. Investors 
deserve to know which companies are taking appropriate steps to 
mitigate climate threats to their bottom lines. This is not 
about wokeness. ESG also helps workers, ensuring that their 
pensions are not going to companies that will later privatize 
and degrade jobs.
    Democrats are working to protect the public's access to 
data and make responsible investment choices. The Biden-Harris 
Administration's Securities and Exchange Commission and 
Department of Labor's rules allow for more information to be 
provided to investors. They are not mandates to consider ESG.
    Republicans' attacks on ESG, they hurt taxpayers by raising 
costs, like in Texas where anti-ESG bill, that bill cost the 
public an additional $300 million to $500 million in interest 
in just eight months. Republicans' anti-ESG crusade, it 
protects their fossil fuel donors to the detriment of people's 
retirement security and their freedom to invest. Republicans' 
political crusade against responsible investing and calling it 
``wokeness,'' be woke. Do not be anti-Black.
    It is against responsible investing in an attempt to 
manufacture a culture war that you know nothing about and you 
are not standing up to fight against, and interfere in free 
market trends and protect corporate interest. And with that, I 
will say, do not speak about something that you do not know 
about. Learn about it from the people who are the ones that are 
most directly impacted, and change your language. Enough is 
enough. This is not about being woke. Being woke is the side of 
history you should be on.
    Wake up to the fact that other people are burdened 
differently than you, that other people have issues that you do 
not even understand but you should be sensitive to. Wake up to 
that, and with that, I will yield back.
    Mr. Fallon. The Chair recognizes Chairwoman McClain.
    Mrs. McClain. Wow. I am going to get back to the issue that 
we are talking about, so thank you, Mr. Chairman. My colleagues 
on the other side of the aisle are quick to identify as free 
market capitalism as soon as it benefits their agenda. What we 
discussed here today is not a problem of the free market. Anti-
competitive ESG practices, where banks and money managers are 
colluding with climate activist forces, force business to 
adhere to enormous compliance costs. And again, I am a business 
owner. I have had to live in this realm. This is not a free 
market, and that is capitalism. That is what we believe in. The 
free market rewards businesses that account for the interests 
of their customers and investors. It is simple.
    In a free market, consumers are free to reward companies 
they agree with by patronizing their business. This is not the 
case with ESG because many of these decisions are being made 
without the customer's knowledge. If an investor does not know 
that their funds are being used to finance ESG initiatives, 
they cannot make informed decisions. When you contribute to a 
pension fund, you are putting your hard-earned savings in the 
hands of a fiduciary who may not have your financial interests 
at heart. And we now are seeing these investors get a green 
light from the government to prioritize their desires over 
Americans' financial best interest.
    Like I said at our last hearing, I do not think my 
colleagues would be so quick to support this level of 
stakeholder capitalism if the ``S'' in ESG was investing in 
pro-life causes or pro-Second Amendment businesses. My goodness 
gracious, we would be all up in arms, and we would be talking 
about everything but the issue at hand because what I find 
interesting with my colleagues across the aisle, when they 
cannot beat you on the issues, they go into name-calling. So, I 
would prefer to just stick with the issues and the facts, 
right? That is why economists do so well because it sticks with 
the facts. Rates of return are pretty simple. We do not get 
into the ideology.
    You know, to me, it is hypocrisy, and it is a tool to 
advance the left-leaning policies without the say of the 
American people, and they try to bully you with the labeling 
and the name-calling. Well, I am, for one, not going to be 
bullied. The facts are the facts. You can call me any name you 
want to call me, but let us look at the facts, and let us be 
honest and let us be transparent. So, after all your name 
calling is done, that is good, let us just look at the facts.
    We have seen today that there are other downstream impacts, 
plain and simple. Workers are facing situations where they may 
be fired for not complying with their companies over 
prescriptive DEI measures. From what we have heard today, those 
measures are not doing much to improve the viewpoint or 
employee diversity in these companies. Unfortunately, and 
ultimately, forced ESG compliance is harming American workers 
and business. And I am going to say this again, forced, not 
free market, not free to choose because when, again, I cannot 
beat you on the issues, I have to go to name-calling. I have to 
go to bullying. All of a sudden, I am a White supremacist and I 
am racist. And, no, I am just talking about the facts, but if 
you cannot beat me on the facts, I guess call me names. So, 
this Committee will continue to investigate this matter.
    And in closing, I want to thank our panelists once again 
for your testimony and your commitment to the facts and 
transparency. And with that, Mr. Chairman, I yield back.
    Mr. Fallon. The Chair recognizes Chairman Raskin for close.
    Mr. Raskin. Thank you, Mr. Chairman, for that kindness. I 
think I pretty much said what I had to say, but I want to thank 
you for having this discussion. I think it has been clarifying 
that nobody is opposed to ESG investing. Nobody is opposed to 
those who want to invest only in companies with a pro-life 
agenda, and we found a bunch of those. That is the free market. 
And really, we do not need congressional hearings or 
congressional action to interfere with the free market because 
people control their own assets, people control their own 
investment.
    And I agree that we need more corporate transparency. I 
would think our next hearing should be about whether 
corporations are giving campaign contributions and engaging in 
campaign expenditures without consulting the shareholders 
because I think that is a real problem with transparency. There 
is a lot more transparency in what we are talking about today, 
than there is with what companies are doing in terms of 
involvement in politics. But thank you for having this very 
illuminating and productive hearing, and I yield back to you.
    Mr. Fallon. Thank you, Mr. Chair. So, several things. We 
heard adjectives and pejoratives, very incendiary, 
unfortunately, ``gaslighting,'' ``MAGA extremist or MAGA 
insurrectionists Republicans,'' ``big corporate,'' ``profits at 
all costs,'' ``anti-Black,'' ``fascist,'' et cetera. I can tell 
you what I am personally. I am anti-socialist, I am anti-
Marxist, I am anti-communist, I am pro-merit, pro-opportunity, 
pro-liberty, pro-American, and I will never apologize for that, 
because the most important diversity we have is the diversity 
of thought.
    I do not care what you are. I care who you are, and it is 
about opportunity in this country. And yes, we have in our time 
fallen very short, obviously, in our history, but we are 
getting so much better. And the things that some of these folks 
that use these pejoratives that are worried about are, 
fortunately, incredibly diminishing phenomena every single day.
    So, what we are talking about here is using ESG. We do not 
want it to violate Federal law. We do not want to put it before 
maximizing returns, and that is just not about profits, it is 
also about prospectus. That is written into the law, and we do 
not want to restrict investments. If you want to invest in 
mermaid freedom, knock yourself out. You want to invest in 
carbon free cookie monsters, knock yourself out. You want to 
invest in a unicorn ranch, knock yourself out. It is just about 
putting and not disclosing to the investor the criteria they 
are using that violates Federal law.
    Are we a country that is a rule of law Nation? Or are we 
going to let rules become more powerful than the law because if 
we are, the 535 of us should just damn well resign right now, 
hire a bunch of Federal bureaucrats and let them run the 
government. That is what we are really talking about, in 
theory, because even if there is a rule that is made that I 
agree with, I do not want it to trump law because then we are 
going to be in anarchy, in chaos, and we are going to lose the 
greatness that we have had as a country. It is very important 
to recognize.
    So, and then one of my other colleagues said about, we want 
to ban books, probably talking about banning books. I am about 
banning books in elementary schools that have explicit 
pornographic material, and that is about it. I do not ever want 
to see Catcher in the Rye banned again. So, and then we talk 
about this country, is it a great country, is it not, and are 
there opportunities out there? Well, you know, for people of 
color and women, well, in this country, if you break us down 
demographically in the five major categories, not going to 
include everybody, but the No. 1 most successful ethnic group 
in this country are Asian Indians, economically, second is 
Asian Pacific Rim, and then White, then Hispanic, and then 
Black. So, if there is White privilege, it is extraordinarily 
not used well.
    And then if you look at those five same categories with 
education levels, it matches perfectly. On average, the most 
educated Americans ethnically are Asian Indian, and they are 
the most successful economically. What a shock. And who is 
second? Asian Pacific Rim, what a shock, third, White, third 
Hispanic, fifth Black. It exactly overlays, which indicates a 
meritocracy.
    So, what we heard here today should concern all Americans, 
regardless of your political affiliation or what you believe 
in. Your hard-earned money is used to fund projects and global 
initiatives that were never meant to provide a return on your 
investment. The ESG is a sham, and it is being forced on 
people. We all know it, and we are seeing the damaging effects 
playing out right here before our very eyes. It is pretty much 
not really up for debate that the ESG funds underperform over 
time. And this Committee is leading the charge here in Congress 
to pull back the curtain on what is happening behind the scenes 
that massive financial institutions never wanted you to know 
about.
    And worse, what does this government and this 
Administration not want you to know? I do not want the 
politicization of the FBI and, by extension, Justice. I do not 
want the politicization of our military. I don't want a 
Republican general and a Democrat general, and, more 
specifically, I do not want our money being politicized, and to 
point, in fact, specifically your financial investing.
    And you know, and that is the scariest part. We need to ask 
these questions. What if we continue down this path letting 
leftist activists, asset managers use their clients' funds to 
pursue a political agenda and decide what is in the best 
interests of the business without having any practical 
understanding of what it takes to run that business? And at 
best, you have less money in your pocket and a warm, fuzzy 
feeling about the brands you may choose to purchase. And again, 
if you want to invest in ESG funds, invest in them, but there 
needs to be proper disclosure.
    Mr. Raskin. Mr. Chairman, could I pose one question to you?
    Mr. Fallon. I yield for a question.
    Mr. Raskin. You are very kind to do it. I just wanted to 
give you the opportunity to clarify one thing you said. You 
sort of elucidated a racial hierarchy in terms of success in 
America, and you said what does that indicate. It indicates a 
meritocracy. And I would just give you the opportunity to amend 
that to say would also indicate the legacy and the persistence 
of racism in America, slavery, Jim Crow, and the history that 
we are all aware of, of anti-Black laws in the country.
    Mr. Fallon. Well, clearly, we have had problems. I mean, 
our greatest original sin has been slavery, obviously. That is 
not up for debate. I do not understand your question, but I 
think it illustrates the point of when somebody says ``White 
supremacy'' or ``White privilege'' or what have you. I find 
this country to be incredibly inviting to all comers. The 
communists build walls to keep people in. We do not keep walls 
to keep people in. People are welcome to leave if they want. 
People from all over the world and every continent would love 
to come here because of the opportunity that is here.
    Now, I am not talking about America in 1865 or 1965. I am 
talking about an America in 2023, and racism is, fortunately, a 
diminishing phenomenon. I know we will always disagree on that, 
but this is my time. And to answer your question, people of 
color, Asian Indians, and they were less than 1 percent 40 
years ago, and they are the most successful ethnic group, which 
is remarkable because if racism truly exists to the extent that 
a lot of people argue, they would not be. They would be fourth, 
fifth, sixth, but yet, they are first. Why? Education is so 
important, and I think that is far more than just an emphasis. 
And the real root to this cause, and we can have discussions 
and more hearings on these things, is if you have to have whole 
families, fathers in the home.
    If I did not have a father in my home--my father passed 
away a year ago--I would not be in Congress right now, for 
sure, because when you are a 14-or 15-year-old, you are just 
not afraid of your mom, and it is hard to raise kids, as we all 
know when raising kids. And that is why it is easier when you 
have the two-parent home, and that is the symptom. We want to 
really treat these things. It is not White people hating on 
Black folks. It is not that at all. You have to focus on the 
opportunities that this country provides you.
    And again, it is about diversity of thought. I sat here the 
entire hearing listening to things I disagreed with, patiently, 
quietly, respectfully because I am not going to learn from 
people that agree with me. I am going to learn from people that 
may disagree with me, but as you just saw, somebody just wanted 
to walk out but that is fine. After all, the end of the day, I 
do believe in American exceptionalism. I do believe this 
country is the greatest one history has ever known. And I do 
believe that in 2023, we should take every opportunity to 
prosper and make sure that the best days of this country have 
yet to be counted, and we have that right here.
    So, back to this topic and to close. You know, the American 
public has every right to understand what their investments are 
really going toward, and we are here to get to the answers.
    Without objection, the Members will have five legislative 
days to submit material and submit additional written questions 
for the witnesses, which will be forwarded to witnesses for 
their response.
    Mr. Fallon. If there is no further business, without 
objection, the Subcommittee stands adjourned.
    [Whereupon, at 4:27 p.m., the Subcommittees were 
adjourned.]