H.R.2358 - Ensuring Sound Guidance Act of 2025; ESG Act of 2025 (119th Congress)
Summary
H.R.2358, also known as the Ensuring Sound Guidance Act of 2025 or the ESG Act of 2025, aims to amend the Investment Advisers Act of 1940. The bill seeks to specify requirements for considering pecuniary and non-pecuniary factors in investment advice. It also mandates the Securities and Exchange Commission (SEC) to conduct studies on climate change and environmental disclosures in the municipal bond market, as well as on the solicitation of municipal securities business.
Expected Effects
The bill will require investment advisers to prioritize pecuniary factors unless a client provides informed consent to consider non-pecuniary factors. The SEC will be required to conduct studies and report on climate change disclosures and the solicitation of municipal securities business. These studies could lead to new regulations or legislative actions in the future.
Potential Benefits
- Increased transparency in investment advice regarding the consideration of non-pecuniary factors.
- Potential for more informed investment decisions based on clearer disclosure of pecuniary effects.
- Enhanced understanding of climate change and environmental disclosures in the municipal bond market through SEC study.
- Improved oversight of the solicitation of municipal securities business through SEC study.
- Potential for regulatory or legislative actions to address identified concerns in the municipal securities market.
Most Benefited Areas:
Potential Disadvantages
- Potential limitations on investment advisers' flexibility to consider non-pecuniary factors, even when clients may value them.
- Increased compliance costs for investment advisers due to new disclosure requirements.
- Possible delays or inefficiencies in investment decisions due to the need for informed consent and detailed disclosures.
- The studies mandated by the bill may not lead to meaningful regulatory changes.
- Focus on pecuniary factors might overshadow other important considerations for some investors.
Constitutional Alignment
The bill primarily affects the regulation of investment advisers and the securities market, which falls under the commerce clause (Article I, Section 8, Clause 3) of the US Constitution, granting Congress the power to regulate interstate commerce. The requirement for SEC studies and reports aligns with Congress's oversight responsibilities. The bill does not appear to infringe upon any specific individual rights or freedoms protected by the Bill of Rights.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).