Dive Brief:
- Democrats on the House Judiciary Committee are inquiring about the financial impact Texas and Florida’s anti-ESG laws have on their taxpayers and retirees, according to letters committee members sent to state officials Monday.
- Committee ranking member Jerry Nadler (D-N.Y.) and Rep. Lou Correa (D-C.A.) — who serves as ranking member on the Administrative State, Regulatory Reform, and Antitrust subcommittee — asked the attorneys general and chief financial officials of Texas and Florida to provide detailed information on the effects of their restrictive policies against “responsible investment.”
- Both letters pointed to recent evidence showing that such anti-ESG policies “threaten public employees’ retirement savings and leave taxpayers on the hook for higher fees and increased borrowing costs.” Nadler and Correa asked the two states to respond to their inquiry by June 3.
Dive Insight:
Nadler and Correa wrote that state efforts to “penalize responsible investment” by prohibiting investors from incorporating ESG factors into their decision making has “injected politics into previously objective financial decisions.” The pair also said Texas and Florida are not the only states leading the crusade against ESG, noting at least 14 states had put restrictions on responsible investment during the 2023 legislative season.
The inquiry comes on the heels of several recent reports that found states’ anti-ESG policies have led to increased borrowing costs and lost investments. Last week, pro-ESG group Unlocking America’s Future unveiled research that showed Texas’ restrictions on responsible investment — including bans on working with financial firms that allegedly boycott guns or the oil and gas industry — had been both economically costly and unpopular with the state’s voters.
The Texas Association of Business also found that Senate Bills 13 and 19 — the former targeting firms that boycott the oil and gas industry and the latter targeting firms for their firearms stances — have cost the Lone Star State approximately $700 million in lost economic activity and 3,000 lost full-time jobs. UAF estimates that Texas could potentially pay an additional $22 billion in high interest rates and fees due to these restrictive laws over the next 30 years.
Nadler and Correa — who also quoted the Texas Association of Business’ March report — said in their letters such findings were “not surprising.” The pair said the anti-ESG laws seemed to “stem from a coordinated political campaign against responsible investment rather than any legitimate concerns about the sound stewardship of the public’s money.”
Texas and Florida were asked to respond to a six-part questionnaire with details on how anti-ESG laws affected state finances directly — including changes in expenses, borrowing costs, investment manager fees, transition and administrative costs — and how such laws impacted the state’s finances indirectly — including lost jobs and economic activity, tax revenue, etc.
The states were also asked whether their respective state pension funds had ever estimated the price tag that would come with implementing such restrictive laws. The Republican-led states were asked to provide the projected performance of their respective state’s pension funds since these anti-ESG laws were implemented compared to similar funds in other states without such laws.
Nadler and Correa also asked Texas and Florida officials about the number of firms that had been “barred from doing business” with the state since these laws were enacted and the reason that company ended up on the state’s “blacklist.”
