Why should anti-ESG bills be stopped?

What are anti-ESG bills?

Since 2022, a number of far-right lawmakers have been introducing what are commonly called “anti-ESG bills” across many states in a coordinated legislative effort that is trying to prevent companies and investors from taking into account environmental, social, and governance risk factors when making their business and investment decisions.

Many of these bills seek to prohibit or severely limit investment managers’ or even insurers’ ability to consider climate- and other ESG-related risks. Other bills ban state pension funds and government agencies from doing business with banks, asset managers, and other companies that apply ESG criteria in their business or investment decisions. Many of these bills focus on boosting business with the fossil fuel sector and industries like tobacco, firearms, and private prisons, and ban the state from contracting with any financial institutions that use ESG risk criteria.

Which bills are passing?

To date, the vast majority of these bills have not been passed, as lawmakers have responded to concerns from pension funds, labor unions, local banking associations, local Chambers of Commerce, and environmental advocacy organizations that the new bills would cost their states’ teachers and government workers billions in lost pension returns, cost taxpayers hundreds of millions of dollars in extra municipal debt servicing costs, limit investors’ ability to make sound decisions, and limit insurers’ ability to provide coverage.

As of June 2023, there had been 165 pieces of legislation introduced in 37 states. In 2023, 22 laws and 6 resolutions made it through the legislative process in 16 states. Most of them seek to ban state pension funds and government agencies from considering ESG factors, as is the case in Kansas and Florida, while states like Texas and Arizona are banning government agencies and pension funds from doing business with asset managers and other companies seen to limit business with fossil fuels or other industries or take ESG considerations into account.

Who is stopping the anti-ESG bills from passing?

Business groups, labor unions, local Chambers of Commerce, environmental advocacy organizations, and trade associations representing the financial sector are fighting to stop anti-ESG bills from passing because the bills put workers’ retirement funds and investors’ ability to invest responsibly at risk. A report from Pleiades found that, “from Florida to Ohio to Texas, labor unions fought to protect the financial security of public sector pension beneficiaries . . .  They also reminded legislators of their members’ right to invest their own money in ways that would benefit–and not harm–themselves and their communities.”