As we celebrate Earth Day, we’re taking a look at the state of environmental, social, and governance (ESG) goals in banking and fintech. Recent actions by the House Financial Services Committee suggest that the industry may be losing sight of these ESG objectives.
For years, the financial services industry has been making progress in its efforts to improve ESG policies by incentivizing clients to choose more sustainable investment options, creating safeguards and efficiencies to create a more sustainable industry, engaging in social stewardship, and more. And while many of those efforts are still happening, some of the progress in ESG has slowed.
The House Financial Services Committee, which has recently taken action on banking regulations and environmental policy, voted along party lines to pass Congressional Review Act resolutions that would void measures aimed at promoting ESG goals. The move would invalidate measures that the Consumer Financial Protection Bureau (CFPB) and other banking regulators initiated to improve regulation around the industry’s ESG efforts.
One of the key resolutions the Committee has its eye on is a CFPB rule capping credit card late fees at $8. While much of the banking industry is in favor of the resolution, saying that it would protect consumers who pay on time, critics argued that it would disproportionately impact low-income and underbanked families.
The House Financial Services Committee also has its eye on climate change in financial regulation. These resolutions are designed to ensure that banks are transparent about their environmental impact and are managing climate-related risks. The lack of current regulation in ESG has resulted in “green-washing” efforts in which financial services companies promote inflated or irrelevant metrics that provide end consumers the appearance that their company, product, or service is more environmentally friendly than it actually is.
These resolutions represent a significant effort by Republicans in Congress to nullify the Biden administration’s financial policies, including those related to environmental, social, and governance (ESG) issues. While they are questioned, However, the resolutions are unlikely to become law due to a lack of Republican votes to overturn a presidential veto.