Dozens of bills were introduced in state legislatures in January by lawmakers worried that Wall Street is using its market clout to influence the investment decisions made by public pension funds and agencies.
A new report from the climate change-focused management consulting firm Pleiades Strategy said some lawmakers in 2024 have adopted several novel approaches as they continue to crack down on environmental, social and governance investment criteria. ESG critics said financial firms using the embattled acronym are shedding fossil fuels from their portfolios and promoting social policies that go against state interests.
A new bill introduced by Republican lawmakers in New Hampshire, H.B. 1267, would have made it a felony punishable by up to 20 years in prison for an official with the state treasury, pension fund or executive branch to "knowingly" makes investment decisions using ESG criteria. The bill was voted down 13-0 by a legislative committee Jan. 30 after representatives from the state retirement system, a business group and others testified against it.
In South Carolina, a bill also highlighted by the Jan. 30 Pleiades report would prohibit state agencies and local towns from offering tax subsidies or other incentives to a company that participates in an ESG scoring or rating system, requiring officials to get assurances from such contractors in writing. The bill, H4699, has 19 sponsors so far.
In Florida, the bill H1301 would prohibit the state transportation department from considering ESG-related factors when planning projects. The prohibition extends to anything related to the Paris Agreement on climate change or an "initiative adopted by the federal government ... to achieve net zero emissions of carbon dioxide."
"I think they're field-testing ideas to position themselves as innovators in this brand, even though most of these bills are failing," Connor Gibson, a co-author of the Pleaides report, said in an interview. "I'm a little surprised that during an election year, Republicans are still choosing to prioritize a losing issue that the public doesn't even care about that much."
As of Jan. 29, 318 anti-ESG bills had been introduced in 38 state legislatures since 2021, according to a new bill tracker Pleiades Strategy launched. By Feb. 1, there were 125 bills pending in 26 states, including 64 carryover bills, the tracker showed.
At the New Hampshire hearing, a Republican lawmaker said he tends to share the bill's sponsors' views on "this whole ESG thing" but found the legislation mandating prison time to be ill-conceived.
"Trying to use the investments of the pension fund to promote or oppose any particular thing ... it's a very bad precedent and not something we should be doing," state Rep. Tony Lekas said after the Executive Departments and Administration Committee vote.
In addition to new anti-ESG bills with some unusual provisions introduced in the 2024 state legislative sessions, Gibson is seeing some new versions of bills being recycled from 2023.
Such reiterations include a new model bill taken up by six states so far that is "intended to chill the private sector by imposing liability upon financial institutions the bills allege to be 'discriminating' against a few select industries," the Pleiades report said.