Green America Submits Letter for the Record to House Committee Ahead of Anti-ESG Hearings

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Leading Green Economy Group Defends Freedom to Invest Responsibly, Offers Data and “Foundational Truths” Ignored in Highly Politicized GOP Report.

WASHINGTON, DC – July 12, 2023 – This morning, the House Financial Services Committee will hold a hearing on Environmental, Social, and Governance (ESG) practices at 10 a.m. Today’s hearing is the first of a series of hearings scheduled for July designed to attack ESG investing and shareholder proxy voting on political grounds.

Green America is the nation’s leading green economy organization with 300,000 individual members and supporters as well as nearly 2,000 companies in its Green Business Network and has educated the public on responsible investing for 40 years.

In anticipation of the hearing, and in response to the preliminary report attacking ESG by the Republican ESG Working Group, Green America submitted a letter for the record to Members of the Committee supporting ESG investing and shareholder proxy voting, backed by real data.

Cathy Cowan Becker, Responsible Finance Campaign Director at Green America, said in the letter:

We would like to challenge several underlying assumptions in this report and other memos from the majority, and clarify several important foundational truths:

  • ESG performance is on par or better than conventional investing, especially in the long term.
  • Environmental, social, and governance considerations are material and pecuniary, not political.
  • The shareholder proxy voting process gives retail investors a critical voice in corporate governance, and reforms suggested by the majority would stifle, not promote, that voice.

Multiple research studies show that returns on socially responsible investing are on par or better than investing not based on ESG principles, especially over the long term. For example:

  • According to Morningstar’s 2022 Sustainable Funds US Landscape Report, most sustainable funds delivered stronger total and risk-adjusted returns than their respective Morningstar Category indexes. Over half of sustainable funds finished in the top half of their Morningstar Category, led by equity funds. Data for the previous five years showed even better results – the returns of 74 percent or sustainable funds ranked in the top half and 49 percent in the top quartile of returns.
  • In 2021, the Morgan Stanley Institute for Sustainable Investing released a study, Sustainable Funds Outperform Peers during 2020 Coronavirus. The Institute found that in a year of extreme volatility and recession, funds focused on “on environmental, social and governance (ESG) factors, across both stocks and bonds, weathered the year better than non-ESG portfolios.” The research analyzed more than 3,000 US mutual funds and ETFs, finding that sustainable equity funds outperformed non-ESG peer funds by a median of 4.3 percent in 2020.
  • The NYU Stern Center for Sustainable Business released a 2021 meta study, ESG and Financial Performance: Uncovering the Relationship by Aggregating 1,000 Plus Studies Published between 2015-2020. The report found that 59 percent of studies showed that ESG investments had a similar or better performance relative to conventional investment approaches, while only 14 percent found negative results. It also concluded that “ESG investing appears to provide downside protection, especially during social or economic crises.” “Using ESG principles to help inform investing is not a breach of fiduciary duty. On the contrary, not taking all factors related to risk and opportunity into account can be seen as a breach of fiduciary duty. Individual, institutional, and public asset managers should be free to consider all information when making critical investment decisions. This is how the free market works. It is not the role of government on the federal or state level to tell asset managers how to manage investments for their clients.”

Regarding specific claims made by the ESG Working Group’s preliminary report, Becker added:

Shareholder proposals are not a significant burden for public companies.

The only mandatory cost under the shareholder proposal rule is for the company to publish a proposal of up to 500 words on its proxy ballot. All other spending is discretionary, and almost all shareholder proposals are non-binding. The board does not have to do anything in response to a proposal.

Shareholder proposals constitute a small percentage of overall proxy votes each year. According to the Council of Institutional Investors, most public companies do not receive any shareholder proposals. On average, 13% of Russell 3000 companies received a shareholder proposal in a particular year between 2004 and 2017. In other words, the average Russell 3000 company receives a shareholder proposal once every 7.7 years. For companies that receive a shareholder proposal, the median number is one per year.

Raising thresholds for ownership and resubmission would squash the voice of small investors.

Currently, in order to file a shareholder resolution at a given company, a person must have owned at least $2,000 of company securities for at least one year. The working group proposes raising that threshold to continuous ownership of at least $2,000 of the company’s securities for at least three years; continuous ownership of at least $15,000 of the company’s securities for at least two years; or continuous ownership of at least $25,000 of the company’s securities for at least one year.

Such revisions would hamper the participation of small and diverse investors in the shareholder resolution process. These smaller investors can have a great impact on corporate practice. According to data compiled by the Sustainable Investments Institute, 176 resolutions on social and environmental topics came to a vote at U.S. companies in 2019. Many were filed by investors with small ownership thresholds. The proposals received an average of 25.5% support, demonstrating that proposals of interest to a large portion of a company’s shareholder base can originate with smaller investors.

Likewise, the working group proposes raising the voting thresholds needed to resubmit a shareholder resolution from 3%, 6% and 10% in the first, second and third year respectively, to a vote of 5%, 15%, and 25% in order to resubmit a shareholder resolution the following year. Again this would squash the voice of small and diverse investors, especially as concerns emerging issues.

In some cases, it can take years for issues such as climate risks, human rights assessments, and governance reforms to be recognized as important to a company’s returns. Through long-term investor engagement and education, corporate boards and shareholders often eventually do adopt proposals that had less support at first but are now seen as best practices.

In 2020, the SEC raised ownership and resubmission thresholds to respond to pressure from corporate trade associations, presenting significant hurdles to filing and resubmitting shareholder proposals. Raising these thresholds again would shut out small investors and leave emerging issues unaddressed.

Proxy advisory firms do not wield excessive influence over investors.

Many pension funds and other institutional investors review research and recommendations from proxy advisors but vote according to their own guidelines and policies. According to proxy advisor ISS, 85% of its top 100 clients use a custom voting policy.

Institutional investors do not “robo vote” proxy advisor recommendations. An NYU-UPenn study finds that the impact of recommendations by ISS is significantly reduced when company-specific factors are taken into account. The proposed curbs on proxy advisors could undermine the voice of investors by limiting the information available and further tilting votes on key proposals in favor of management.

To speak with a representative of Green America, contact Max Karlin at (703) 276-3255 or



Green America is the nation’s leading green economy organization. Founded in 1982, Green America provides the economic strategies, organizing power and practical tools for businesses and individuals to solve today’s social and environmental problems.