Rep. Patrick McHenry has a big job and a delicate balancing act ahead of him as Republicans are poised to take control of the House and he’s poised to take the helm of the Financial Services Committee.

The 47-year-old North Carolina Republican will need to find a way to manage the expectations of GOP members who will want him to push hard — against regulators appointed by President Joe Biden, as well as financial companies that they see as advancing “woke” policies on environmental, social and governance issues. And he’ll need to do that while harboring hope of striking bipartisan deals on issues such as cryptocurrency regulation, data privacy and capital formation, if the GOP wins back a majority as expected.

He outlined his plans for leading the committee in an interview before the midterms.

This interview has been edited for length and clarity.

How far along are you in terms of putting together an oversight agenda and what do you want to prioritize at this point?

We are working on a vigorous and fulsome oversight agenda of this administration — something that has been lacking in the last two years under a Democrat House and Senate. And we’ll have a significant amount of oversight of the CFPB and the SEC.

Both have moved at breakneck pace on rule-making. Both have gone in an expansive way beyond that which we think the law permits them to act.

How focused will you be on industry oversight? There’s interest from a number of your members and other lawmakers in the conference about how financial institutions are handling climate, social issues and China. 

My members have a real interest in industry oversight, and I listen to my members.

There will be significant emphasis on not just oversight of the regulators but of the regulated and the decisions they’re making.

So we can expect the CEO hearings to continue but with a different focus?

No decision’s been made about whether or not we’re going to continue the CEO hearings. I’m going to listen to my members there. I have a number of members that are interested in continuing that type of hearing or something in that genre.

What we do know is we have significant market participants that have an outsize power on how capital’s allocated. And we want to make sure that we understand how they’re using that power. … Is it something that’s good for the U.S. economy or is it something we think is long-term bad for the U.S. economy?

I have a number of my members that want to have a specific focus on the climate regulations that are being put forward at the Securities and Exchange Commission — but also how folks in industry are using their power to make decisions that are well beyond what we think the law permits them to make. I’ve got a significant number of members that are interested in the climate debate and how industry has taken it upon themselves to act to limit the production of American energy.

How much pressure are you feeling from your members to send an anti-woke message to Wall Street? We’re seeing that at the state level in intense ways. You’re going to be in the middle of that at the federal level.

My members are intent on sending a message that you can’t kowtow to a far-left agenda and still have Republicans fighting the good fight on behalf of free markets and a marketplace that would benefit these companies. This is a complicated factor for sure. I have a variety of members that are deeply engaged in the subject matter, and you’ll hear a lot more from them, that’s for sure.

Isn’t ESG on the corporate side a free-market response to what these businesses are seeing on the ground? How should these companies acknowledge or address some very real environmental changes that we’re starting to see?

On the question of ESG, is it a free-market approach? … It depends.

You have shareholder activism, yes. You also have activism among pension firms from blue states in a significant large way pushing a liberal agenda through their economic power — and a liberal social agenda using their economic power.

The question of climate and the climate regulations from the Securities and Exchange Commission are a separate basket.

The question for securities law fundamentally is materiality. Everything beyond materiality becomes a question of activism for either the right or for the left. When you talk about regulation of these companies through private-sector means — of investors having their voices heard — there’s a proper check and balance, yes, but there is also that which slips beyond traditional oversight of these corporations.

We have to understand the distinction between all of those things because it is not as simple as saying, ‘climate good,’ [or] ‘climate bad.’

We have to have proper oversight of the climate rulemaking from the Securities and Exchange Commission.

We also have these participants in the marketplace that have outsize impacts — some traditional and some that are going beyond what is a traditional limitation that we’ve seen in the marketplace.

I believe climate change is real. We have to do something about it. There are smart, measured ways that we can have a broad impact that use innovation and use technology to get a better answer. That puts me in a very different position than this administration that wants to do through regulatory fiat that which I think technology is driving toward in a natural state.

Do you think it should be addressed by the National Flood Insurance Program or the Federal Housing Finance Agency — government agencies that have some risk from climate change?

We have to take in the proper risk factors for the proper regulators.

The largest set of assets that the federal government owns — outside of the Federal Reserve — is our housing portfolio with Fannie and Freddie. We don’t have a proper understanding of the risks associated with adverse weather events and the impact of those weather events in a changing climate.

It’s also important that we understand the risks to the National Flood Insurance Program with the type of storms and the severity to the taxpayer of the cost of these storms.

Is that an area where you think there’s room for work with the Biden administration? 

I’m hopeful.

GAME ON — Welcome to the Long Game, where we tell you about the latest on efforts to shape our future. We deliver data-driven storytelling, compelling interviews with industry and political leaders, and news Tuesday through Friday to keep you in the loop on sustainability.

Team Sustainability is editor Greg Mott, deputy editor Debra Kahn and reporters Jordan Wolman and Allison Prang. Reach us all at [email protected], [email protected], [email protected] and [email protected].

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