The battle in the states for freedom to invest responsibly – and how you can help

Submitted by cbecker on

As President Biden was vetoing a Congressional resolution that attacked our freedom to invest in companies that practice responsible environmental, social, and corporate governance (ESG), a pitched battle has been raging in the states.  

So far this year, 138 bills and four resolutions have been proposed in 33 states that would roll back the ability of fiduciaries to consider ESG factors in investment and contract decisions.  

Responsible investing has come under sustained attack on both the federal and state levels as part of the right-wing culture wars against what they call “woke capitalism.” These bills would force investment managers to disregard important considerations of risk and return, harming state employees and taxpayers alike. Many states have found these bills would cost millions in fees and lower returns. 

While I can’t cover all state bills in one blog post, I can give you a broad outline, tell you how things are going for the anti-ESG campaign – which is facing a lot of pushback – and what you can do to help.  

A guide to anti-ESG bills on the state level 

Four main types of bills are being considered in the states: 

  • Bills that target public worker pension programs
  • Bills that target state contracting authority 
  • Bills that require disclosure or consent for ESG investing 
  • Unique bills with no model anywhere else 

Pension bills 

Almost 50 bills in the states target management of state-run retirement funds, requiring financial officers or pension boards to focus solely on “pecuniary factors” in investment decisions.  

  • One model bill from the right-wing American Legislative Exchange Council (ALEC) forbids considering ESG factors and “events in the distant future or that are systemic” -- a clear reference to climate change.  
  • Another model bill from the Heritage Foundation specifically forbids consideration of greenhouse gas emissions or diversity among corporate boards or employees.  

Some bills list other issues that state pension fund managers are not allowed to consider. For example, an Indiana bill would forbid investing in funds that limit or boycott fossil fuels, firearms, agriculture, timber, and animal products, while a Kansas bill adds refusal to provide abortion access and transgender health services.  

Contract bills 

Almost 40 bills target state contracting authority:  

  • Some are based on a 2021 ALEC model bill that prohibits state contracts with financial service companies that boycott fossil fuels.  
  • Others are based on a 2022 ALEC model bill that expands the prohibitions to any company (not just financial services) that has any sort of boycott against a long list of favored industries, including fossil fuels, timber, mining, agriculture, firearms, and more.  

These bills often require the comptroller to create a blacklist of companies the state is not allowed to do business with. Many also require the state to divest from such companies -- sometimes with no exceptions even if it increases fees and lowers returns, a direct violation of state fiduciary duty. 

For example, an Iowa bill that has passed the Senate and is now in the House would require a blacklist and divestment from companies that boycott fossil fuels, timber, mining, agriculture, and firearms, with no exceptions for increasing contract costs and lowering investment returns. A similar bill in Kansas adds companies that do not support access to abortion or transgender health care. 

Disclosure bills 

A third type of state bill, modeled on New Hampshire’s Fair Access to Financial Services Act of 2022, pertains to loans or contracts by financial institutions with individuals, organizations, or companies.  

These bills require financial institutions to disclose “subjective criteria” such as ESG scores, diversity, political, or ideological factors, but some ban these criteria entirely. Some bills require financial institutions to disclose these criteria before a contract is signed, while others require it only for customers who are denied services. There are various levels of civil and even criminal liability. 

Unique bills 

Finally, several states are considering their own unique spin on anti-ESG. Texas is the leader here, with proposals that would:  

  • Urge Congress to investigate BlackRock CEO Larry Fink 
  • Require companies to prove that using ESG criteria is in their best interest 
  • Prohibit shareholder proposals that promote disclosure of greenhouse gas emissions.  

States fight back for the freedom to invest 

As these bills make their way through state legislatures, not all has gone smoothly. Where these bills do well is in states whose financial officers are committed to the anti-ESG crusade. For example:  

  • Utah – whose state treasurer Marlo Oaks is national policy chair for the anti-ESG State Financial Officers Foundation (SFOF) -- passed four laws and one resolution prohibiting state investments and contracts with firms that boycott favored industries. 
  • Idaho – whose treasurer Julie Ellsworth is SFOF’s national policy vice-chair – passed one law with two more close to passage that prohibit state investments and contracts with firms that boycott favored industries.  
  • West Virginia – where SFOF member Riley Moore is state treasurer – passed a law limiting consideration of ESG in state pensions over criticisms of the state investment board.  

Yet other states – including some conservative strongholds – have seen surprising pushback, usually tied to the cost of anti-ESG legislation and activism by local bankers, insurers, and retailers.  


After Kentucky passed a law requiring the state to divest from financial firms that engage in fossil fuel boycotts, state treasurer Allison Ball created a blacklist that included firms such as BlackRock, JPMorgan Chase, and Citigroup. Kentucky Attorney General David Cameron then sent 44 subpoenas and demands for documents related to the NetZero Banking Alliance to these and other megabanks. 

In response, the Kentucky Bankers Association sued, calling Cameron’s demands an “amazing overreach,” while the board in charge of the state retirement system sent a letter to Ball saying it would not divest from the blacklist of fund managers because doing so “would be inconsistent with our fiduciary duty.” BlackRock alone manages about 30% of the state retirement funds.  

Ironically, none of the targeted financial firms actually boycott fossil fuels – in fact, most have substantial investments. But like most large firms, they also have ESG policies.  

North Dakota

In North Dakota, the House of Representatives voted 90-3 against a bill that would have required the state to stop doing business with a blacklist of financial institutions that boycott fossil fuels, and voted 87-6 against a bill that would have required the state pension fund to divest from a blacklist of financial institutions that make ESG investments that could conflict with energy or agriculture industries. 

Key to these votes was testimony from the Department of Financial Institutions Commissioner, North Dakota Securities Commissioner, North Dakota Retirement and Investment Office Director, North Dakota Bankers Association, and Bank of North Dakota. Even the bill’s sponsor turned against the contracts bill, while the state investment board said the pension bill would require doubling fiscal staff.  

The North Dakota House did pass two other similar bills, but only after amendments completely gutted them, leaving the study of ESG trends and economic boycotts as the only requirements. 


In Indiana, a bill that requires the state’s $43.7 billion retirement system to divest from any funds whose managers use ESG factors -- even for other clients, --would cost the state $6.7 billion in lower returns over the next 10 years, a fiscal analysis found. The amount was so shocking that a long list of opponents lined up to testify against it, including the Indiana Bankers Association and Indiana Chamber of Commerce.  

Republicans amended the bill to exclude private equity and hedge funds, dropping the estimated losses to $5.5 million over 10 years – still a hefty amount. The bill passed the House and is now in Senate committee. Indiana has since hired anti-ESG Strive Asset Management to manage their shareholder votes on company policies, paying its co-founder Vivek Ramaswamy $4000 an hour.  


In Kansas, a bill to prohibit state contracts and retirement investments with companies that use ESG criteria would cost $1.1 billion in divestment costs and $3.6 billion in lowered returns over the next 10 years, the Budget Division found. The bill is so vague that “all current investment managers would be disqualified,” said Alan Conroy, executive director of the Kansas Public Employees Retirement System.  

Among those testifying in favor were Kansas Attorney General Kris Kobach, Treasurer Steven Johnson -- a member of the anti-ESG SFOF – and longtime climate change denier William Happer. Subsequent amendments indemnify the retirement system for actions needed to comply and allow hiring of a proxy voting advisor. The bill has passed the Senate committee and moved to the full Senate. 

Other states 

  • Officials with the Arkansas retirement system said the state could lose up to $40 million per year if a bill passes requiring divestment from a blacklist of companies that use ESG metrics. The bill, whose sponsor says he doesn’t believe these findings, is close to final passage. 
  • The Nebraska legislature has considered three anti-ESG bills, none of which have moved beyond committee hearings after the opposition from the state’s banking industry. Robert Hallstrom of the Nebraska Bankers Association said one bill would require the state treasurer to dictate a bank’s business and that another could result in significantly lowered returns.  
  • In Wyoming, all three anti-ESG bills are dead after considerable pushback from the state treasurer’s office and retirement system. “The bottom line is it would probably cause us to sell just about everything we have other than U.S. Treasury bonds,” chief investment officer Patrick Fleming said. The state could not invest in Peabody Coal because it has an ESG policy, he noted. 

Controversy at ALEC 

As mentioned previously, many of these state bills are based on model legislation from the American Legislative Exchange Council (ALEC), that would require states to stop doing business with companies considered to be boycotting fossil fuels, logging, mining, or agriculture businesses.  

Yet ALEC has not officially endorsed its own model bill. In January, the ALEC board, comprised of 23 Republican state lawmakers, voted to send the bill back to committee after lobbying by the American Bankers Association and state banking associations. “Government should not be dictating business decisions to the private sector, which is what the draft model policy proposed,” the ABA said.  

The fossil fuel industry is pushing back. The Domestic Energy Producers Alliance sent a letter to ALEC board members asking them to adopt the model policy. The measure would “ensure that our state and local taxpayer dollars are not advancing the woke agenda,” the letter said.  

Divesting from ESG turns out to be expensive 

Several studies show that anti-ESG laws result in substantial costs: 

Data from Econsult Solutions
  • A Wharton School study found that two 2021 Texas laws banning cities from contracting with banks that have ESG policies cost an extra $303 million to $532 million in higher municipal bond interest rates. 
  • A report by Econsult Solutions found that taxpayers in Florida, Kentucky, Louisiana, Missouri, Oklahoma, and West Virgina could owe up to $708 million in additional interest charges on municipal bonds due to anti-ESG laws and proposals.
  • A Bloomberg article shows that Texas is paying 19 basis points more than California and Florida is paying 43 basis points – almost half a percentage point – more in interest rates on the bond market because they prohibit contracts with lenders that consider ESG. 

Public opinion supports responsible investing 

Despite the concerted campaign to push anti-ESG bills across dozens of states, multiple polls and focus groups show that public opinion clearly supports responsible investing.  

  • A poll by Penn State and ROKK Solutions in fall 2022 found that 63% of respondents – including 70% of Republicans -- say the government should not set limits on ESG investments.  
  • In focus groups conducted by JUST Capital in December 2022, participants said companies should be “good corporate citizens” and make a positive impact on society, especially by paying their employees a fair, living wage. They also saw ESG as part of a sound investment strategy.  
  • Polling by Climate Power and Data for Progress in March 2023 found that most think financial managers should be able to consider ESG factors in investment decisions, and they support investing public retirement funds in clean energy assets. 

Investors also see ESG as a critical part of their fiduciary duty: 85% of investors are interested in responsible investing, 86% believe companies with sustainability practices may be better long-term investments, and 84% are interested in sustainable investments that can be tailored to their needs, according to US SIF: The Forum for Sustainable and Responsible Investment

Even many Republicans, who may not like ESG investing, do not support the war against it. “I think we have to attack [wokeness] in America, but I’m a free market guy,” New Hampshire Governor Chris Sununu said. “If a business wants to be woke, I don’t agree with it — I completely disagree with it. But it’s not up for the government to come in and punish a business or penalize a business.” 

How you can stand up for socially responsible investing 

If you live in one of the states currently considering bills that would limit responsible investing, the most effective thing you can do is contact your state legislator to voice your disapproval.  

States currently considering anti-ESG legislation include Alabama, Arkansas, Arizona, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, and Texas. All bills are dead in Colorado, Mississippi, Virginia, and Wyoming. All bills have either died or been signed into law in West Virginia. All bills have been signed into law in Utah. Reach out to me at if you have any questions. 

You can also support responsible investing by: 

My next blog will examine the funding sources for the anti-ESG campaign, but for now understand this is the symptom of once-dominant industries trying to maintain their hold on power and profits – and know their days are numbered. There are more of us, and we will prevail if we stay true to our values. 


I am deeply indebted for the material in this blog post to several allies and organizations that have been tracking anti-ESG legislation in the states and beyond. Among them are: 

  • Connor Gibson, founder of Grassrootbeer Investigation, who has been painstakingly documenting state legislative hearings. 
  • Lara Friedman of the Foundation for Middle East Peace, who has tracked how anti-ESG legislation is a direct descendant of anti-BDS (boycott, divest, sanctions) laws. 
  • Frances Sawyer, founder of Pleiades Strategy, whose guide to model anti-ESG legislation provided the basis for this analysis of the different types of state bills. 

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