Bill Blocks Pensions, Endowments from Investing in ‘Techno-Totalitarian’ China

Is it ESG for me but not for thee? 

Republicans heavily criticized environmental, social, and governance (ESG) investing policies in recent months, arguing it does little more than serve a woke agenda at the expense of investment returns. 

For instance, they say divestment from fossil fuels blunts performance and hurt investors, and investment managers should only focus on “pecuniary” factors in their evaluation of a potential position. 

The GOP has gone so far as to sue to prevent ESG from being implemented in several state pension funds, and House Speaker Kevin McCarthy proclaimed that ESG allows investment managers for many workplace retirement plans to “push a political agenda at the expense of retirement savers.” 

And the politicization of the investment process continued Aug. 3 when Republicans introduced a bill to force non-profits, university endowments, public pension plans, and any other tax-exempt entity to divest from Chinese companies or lose their tax-exempt status.

The House Select Committee on the Chinese Communist Party (CCP) Chairman Mike Gallagher, R-Wisc., along with Senator Josh Hawley, R-Mo., and several Select Committee members introduced the Dump Investments in Troublesome Communist Holdings Act (DITCH Act).

The goal is to prevent tax-exempt American entities from aiding the People’s Liberation Army and helping the CCP finance what they called its “techno-totalitarian state.”

The DITCH Act defines disqualified Chinese companies as any company incorporated or based in China, one that is more than 10% of the stock owned by some combination of Chinese entities or is directly or indirectly owned by a Chinese entity.

The bill would allow the treasury secretary to grant a waiver to certain non-profit entities if their need to hold certain Chinese assets outweighs the national security risk. However, the secretary would need to publicize the reasoning in regular reports.

“American taxpayers should not be forced to subsidize investments that benefit the Chinese Communist Party,” Gallagher said in a statement. “Universities, non-profits, public pension funds, and other institutions that want preferential tax treatment must choose: are they committed to their professed values or to financing a genocidal communist regime?”

“Universities, foundations, and other entities are exempt from federal income tax for their work promoting the public good in the United States,” Hawley added. “Investing in China does the opposite: it advances the economic ambitions and military modernization efforts of the Chinese Communist Party while selling out American workers and values. These tax-exempt entities must stop investing in China or lose their tax-exempt status.”
Gallagher and Hawley previously introduced the DITCH Act in the 117th Congress.

THE FULL TEXT OF THE BILL IS HERE.