Warned companies to not violate the law. And initiated litigation where warranted. Republican attorney generals are defending americans from these global elites and radical g. S. E. Advocates. We appreciation the attention of this committee and members of congress are giving to e. S. G. This conversation and debate is one that must be returned to you, our nations policymakers. Thank you for the time and being here today. Thank you, general reyes. Chairman comer, ranking member, and members of the committee. Thank you for letting me testify before you on e. S. G. Factors are distorting our fangs systems and harming consumers and working class americans. It involves some of the biggest and most powerful players in the Global Economy forcing costly operational changes on American Companies in pursuant of the 2025 pairs Paris Agreement goals. These goals have never been adopted by congress. But contemplate changes to our way of life that are farreaching and fundamental. These changes involve balancing tradeoffs. How quickly or slowly the government imposes new technologies and how reliable of a power grid well have. Governor reyes my view we can trust consumers promote Energy Independence or dominance and avoid as much regulation as possible. Answering these difficult questions is the role of the peoples elected representatives in our republican form of democracy. That would be each of you in congress and state and local policymakers, not me or unelected bureaucrats, foreign governments, Asset Managers, or anyone else. Ever since the signing of the Paris Agreement theres been and open conspiracy to bypass congress. Some of these groups are Climate Action 100, which includes the largest Asset Managers, banks, and Insurance Companies globally. These organizations seek to use are collective market power over tens of trillions in assets. They drive up cost of goods and harm shareholders. In sum, e. S. G. Is undemocratic tax on our economy and productivity. E. S. G. Also weakens Americans National security and allies for all the reasons my khraog outlined. Many renewables require rare earth elements and supply chain needs dominated by china. Thus adopting these fundamental changes to our Energy Supply provides china more leverage over our economy and security. The various problems with e. S. G. Present a multifaceted topic beyond the scope of any single hearing. In addition to the more ma crow e. S. G. Concern, the general marshal and i have raised, i give you these concerns today. Areas the committee can and sure investigate further. The first is the roll of asset manager agreements on Utility Companies and whether the federal Energy Regulatory commission or ferc is doing its job to ensure Asset Managers who collectively own significant percentages of utility stock are improperly influencing the operation of those utilities. The second is the role of proxy Advisory Firms and making religiouses based on the goals of pressure groups rather than shareholders best interests. In one particular case it includes a proposal for considering race in insurance underwriting which violates am cam antidiscrimination laws and should not be on proxy statements. The third is the recent department of labor rule allowing erisa fiduciaries to consider collateral factors. This is a severe weakening of the rule. I applaud you the bipartisan action you took in congress to repeal this rule and the c. R. A. Its only because of the president s veto this rule presently stands. Im proud to be leading a coalition of 26 states along with private parties challenging this rule in court. In conclusion, im not here to debate the policy of e. S. Or g. , there is a time and place for that. And while it may not be today or in this committee, i am convinced it is in this larger body of congress where such policy should be determined. So film not here to dispute or defend policy, what is my purpose . Im here to warn you about the process of involved in effectuating e. S. G. Goals. No matter how much you may agree with the policy shall pushed, if you deconstruct the process it is a flawed and dangerous one and may also be illegal. The process threatens your prerogative as representatives of the people. It gives no consideration to checks and balances or separation of powers. It ignores the rule of law, undermines our american system of lawmaking. However inefficient and vexing it may be. It focus all the power sectors of the Financial Center into one organized syndicate of pressure. Whenever such a concentrated away rey of power conspeurs together for spaefbg outcome, we must be airy. As state a. G. s well exercise our power to expose these entanglements. We hope you use your power to do the same. Chair comer the chair recognizes treasurer freichs. Mr. Freichs thank you. Good morning, chairman comer. Ranking member raskin, members of the committee. Im Michael Freichs and i am aet Illinois State treasure. The states chief investment and banking officer, in that role my office madges approximately 52 billion. Including 26 billion in state funds. 17 billion in College Savings and retirement funds. And about 9 billion on behalf of local and state governments. I serve as trust tea which manages approximately 28 billion in pension assets for 230,000 beneficiaries. It is my job to protect and grow the hardearned savings of families across the state. As well as funds that state and locals depend upon. I take this responsibility very seriously. Whether its the single popl trying to save for her kids College Tuition or town fans tp pbsing new schools, i know they are trusting our office to grow returns on those funds over the long term and ensure that they have the money they need in the meantime. I am tasked with investing not just for the next quarter, but with the goal of maximizing returns over the next quarter century. This is what brought me here today. We are witnessing a widespread, highly coordinated, politically motivated attack on investors and the hardworking people they serve. This pushback is antifree market and antiinvestor. It is misleading and harmful. It harms retirement savers. Pensioners. Working people, businesses, and harms america. This coordinated campaign is focused on e. S. G. Investing. Most people dont know what e. S. G. Is. E. S. G. Is data. It is simply Additional Information that investment professionals use to assess risk and return prospects. It is about value not about values. In order to maximize returns an investor must be able to manage and mitigate risk. The more tate data we as investors have, the better informed our decisions are when selecting investments over the long term. E. S. G. Is about looking at a wider range of risks and value opportunities that have material Financial Impact on investment performance. For example, if you are investing in a pharmaceutical company, thinking about whether that company has exposure to massive lawsuits because of its role in the opioid epidemic. Our approach is toeupbt great material e. S. G. Factors into Investment Decisions along with many other considerations. We are not ignoring traditional financial factors like profitability and creditworthiness. We are integrating more gate data into our decisions to give us a better idea of risk and growth prospects. This approach is backed by academic rich. But its also common sense. Companies that value their workers have less turnover and higher productivity. Companies that build a strong Corporate Governance structure be more resilient and valuable over the long term. While i welcome healthy debate about best practices and die douchary duty, i do not like blacklists or overreaching legislation that strips individuals from investing. I do not ignore the research, fundamentally misunderstand the role of if i tkaoeurbaries, and impose real costs on taxpayers, pensioners, and hardworking families. When it comes to material data, its irresponsible to tell investment professionals to ignore information that they can use to do their jobs better. Frankly, im deeply concerned by the highly orchestrated attacks on the investment profession and the focus on restricting investors freedom to exercise their professional discretion and fiduciary duty. To Ask Investment professionals to ignore material risks and Investment Opportunities is asking us to stop doing our jobs. For example, should we ignore what Health Care Companies understaff their operations and jeopardize the safety of patients . Would you expect a company that does this to continue to increase in shareholder value . It would be irresponsible to ignore these issues like these. It would be foolish to hinder professionals abilities and their freedom to invest responsibly. This opposition to decades of work by investment professionals is a dangerous intrusion in our free market system. If unchecked, this war on investors will staoeufle economic growth, cost taxpayers and pension pensioners billions of dollars as many studies have already found. It will obstruct investors ability to protect and grow peoples hardearned savings. In closing, now is not the time to stop investors from considering prudent data that can lead to better returns over the longterm, the American Economy depends on investors, please let us do our jobs. Thank you for your time and attention. Chair comer without objection, representative magaziner will be waived on the committee for the purpose of asking questions at todays hearing. Without objection, so ordered. I want to remind our witnesses and the members before we enter into the question and answer phase that we have a fiveminute clock and we try to adhere to that fiveminute time frame. If someone asks a question, the tpaoeuplt expires, well give you an opportunity to answer it. Be mindful we have a lot of questioners and we want to get through this. Well begin questioning recognizing the gentleman from louisiana, mr. Higgins, for five minutes. Mr. Liggins mr. Higgins thank you, mr. Chairman. Part of the focus of our hearing today is based upon a recent letter signed by 21 attorneys general highlighting our organizations, including Asset Managers and proxy advisors could be violating state and federal law to channel funds for political objectives. In the category of e. S. G. Environmental, social, and government practices. One of my witnesses exclaimed that just expect to review whether or not some of your colleagues are violating the law. In the course of doing their job. From the second paragraph of that letter, which was signed, by the way, again, mr. Chairman, by 21 attorneys general, the second signature on that letter id like to submit for the record the Opening Statement of my own attorney general, my colleague and friend, attorney jeff landry, former congressman here in this body. Was not able to attend but i would like to submit his statement for the record, mr. Chairman. Mr. Comer without objection. Mr. Higgins thank you, mr. Chairman. From the second paragraph of the letter signed by so many of our attorneys general addressing Asset Managers said these companies are some of the largest Asset Managers in the United States. Its important for American People watching to grasp this. Collectively controlling trillions of dollars of investments. Many individuals and organizations count on these Asset Managers to provide sound Investment Products and advice. The top three Asset Managers alone cast about a quarter of the votes for the s p 500 companies, shareholder meetings. They are therefore not only bound to follow the general laws discussed, but also have extensive responsibilities under both federal and state laws governing securities. Broadly those laws require that Asset Managers to act as a fiduciary and in the best interest of clients exercising due care and loyalty. Simply put, Asset Managers are not the same as political or social activists. And should not allow vast savings entrusted to be commandeered by activists like e. S. G. Activist organizations. Attorney general reyes, i would like to address the question to you, sir. Regarding to clarify for america what legal requirements must Asset Managers who act as fiduciaries adhere to when investing on behalf of a client . How do these requirements Impact Investment decision makings . Im going to ask you to address not only the letter of the law, but the spirit of the law that we are inquiring about today. Mr. Reyes thank you for the question, congressman. Ill try to be brief. Its very simple. Their duty is a fiduciary duty. Under laws like erisa it is the highest of all duties that one can owe to another in a fiduciary relationship. That duty requires them investing assets on behalf of others to maximize shareholder value. To maximize return back to the shareholder. Its as simple as that. That has been the rule, the prime directive, if you will, for generations. It served our market and nation well. Mr. Higgins how would you assess for the committee and for americans viewing this hearing, how would you assess attorney general reyes the performance of e. S. G. Investment versus traditional investment . Mr. Reyes i believe there are a number of studies that show that e. S. G. Funds have globally underperformed. So my data contradicts the data that we saw earlier from the ranking member. If i recall, and there are multiple studies, ill point to one, over the past five years global e. S. G. Funds have underperformed the broader phaebgts by more than 250 basis points per year, an average 6. 3 return compared with an 8. 9 return. In other words, an investor who puts 10,000 into an average global e. S. G. Fund in 2017 would have about 13,500 today. Compared with 15,250 investment in the broader markets. Thats one example from one study. Some Market Research that demonstrates that e. S. G. Is not necessarily a good bet. That Asset Managers should be investing in the best interests of their beneficiaries or the shareholders, not for a prescribed outcome thats dictated by these horizontal agreements and pushed and pressured by organizations like nzam and Climate Action 100. Mr. Higgins i thank general reyes for his clarification. I yield. Mr. Comer the chair recognizes the ranking member. Mr. Raskin thank you, mr. Chairman. Mr. Freichs, you say e. S. G. Is data. Some people call it e. S. G. Some call it responsible investing. Some people just call it exercise of fiduciary obligations. You are saying whats under attack is data. How could more data hurt . Mr. Freichs it cannot. What we need for investors to make good decisions. I liken this to the tax estate that would proscribe Asset Managers providing this data for us. Making us pick up Fantasy Football Team without knowing the players weights, injury status, track record. You cant make good decisions without useful pertinent information. And thats what e. S. G. Is. Mr. Raskin go into a time machine for a second. How does your job differ from someone who was the treasurer of illinois 50 years ago . Back in those days it seemed like it would be simple if you were trying to do the valuation for an auto company, how many autos are pumped out every year and number of manhours that go into it. How is the valuation of Companies Different today in 2023 than it was 50 years ago. Mr. Freichs the nature of value in the s p 500 has changed doctor mat dramatically in the last 50 years. 70 to 80 was intangible assets like cars, paper, pencils. And you could do an analysis depending on how many acres of forest you have under contract. You could see how many cars and pencils you could produce. And reach a value. Today the s p 500 has about 80 of the value in things like brands. Intellectual property. Those things are subject to different risks than those companies 50 years ago. We are just trying to guard against those risks. A company like google is not worth how much it is today because the number of the number of data they have. Its base the on reputation. Ale is not worth 1 trillion because of the number of i phones they sell but their reputation. Those are susceptible to social and governance risks. Mr. Raskin some of the disagreement here is about facts. I appreciate what attorney general reyes. He made the claim that e. S. G. Informed investments do more poorly than the Standard Poors. Our data is cleatly different from that showing its been overperforming. I would like your comments on that. Then i would like you to comment on this. Lets say utah sees it differently than illinois. Is there any problem with you pursuing the Investment Strategy you want and utah pursuing the one they want . Mr. Freichs investing is not easy. If someone doesnt want to look at this data, thats fine. They have that freedom. Nothing in e. S. G. Proscribes someone has to consider these sources. I would say they are not fulfilling their fiduciary duty if they didnt, but they have that right. I would cite other studies like new york study Stearns School of business, a metta study, multiple academic studies, looked at 245 individual studies on e. S. G. And