Republicans are gaining steam with their call to ban investment practices that consider issues like climate change, with 16 GOP-controlled state legislatures passing laws this year and more measures pending.
But carrying out these laws is not cheap. Implementing systems of enforcement coupled with required divestments can cost taxpayers and public pensions billions of dollars, write Adam Aton and Avery Ellfeldt. That has led some lawmakers to amend or rescind their proposals on so-called environmental, social and governance investing.
In Kansas, for example, lawmakers amended an anti-ESG law after the state budget office estimated it would cost Kansas’ retirement system $3.6 billion over a decade.
“I hate to sound provocative,” Tim Graham of the Kansas National Education Association said during a hearing on the bill. “But when it comes to our pensions, keep your culture wars out of them.”
A related measure in Texas cost taxpayers an estimated $303 million to $532 million over an eight-month period. Indiana lawmakers amended a similar bill after a state office concluded it would cost public retirees $6.7 billion in losses over 10 years.
Model bills and bitter pills
States weighing anti-ESG laws are largely drawing on a suite of bills written and popularized by national conservative think tanks, according to a report by Pleiades Strategy, an environmental group.
But each state has a distinct approach, partly because lawmakers are nipping and tucking provisions as cost concerns grow. Experts say the resulting patchwork of laws is creating an increasingly difficult business environment.
“As a financial services firm … you are pretty unlikely to satisfy all 50 states,” said Jennifer Schulp, who directs financial regulation studies at the Cato Institute, a libertarian think tank. “Over the long haul, I think [these laws are] a drag on the financial industry, as the costs of doing business are raised.”
Plus, the state laws are sometimes in conflict with federal ones. The state laws say climate-related information is not material to financial performance and so should not be considered. But the Supreme Court has defined “materiality” as any information of interest to a “reasonable investor.”
And investors are interested — meaning adhering to a state law could mean violating federal law and vice versa, said David Webber, a Boston University law professor who focuses on ESG investing.
“That’s the liability trap,” he added.
It’s Thursday — thank you for tuning in to POLITICO’s Power Switch. I’m your host, Arianna Skibell. Power Switch is brought to you by the journalists behind E&E News and POLITICO Energy. Send your tips, comments, questions to [email protected]
Today in POLITICO Energy’s podcast: Kelsey Tamborrino breaks down the Biden administration’s efforts to increase the amount of biofuels that oil refiners must blend into the nation’s fuel mix.
A tale of two types of steel
The Energy Department is considering a rule that could force electrical equipment companies to use a certain type of steel called amorphous metal to build transformers, which are key for a functioning grid, writes Brian Dabbs.
Advocates say amorphous metal is superior to traditional steel because it’s more energy efficient. But only one company in the country makes it, and opponents argue that means the rule could lead to further supply chain delays.
Colorado River cuts
The largest Native American reservation in the United States has lost a key legal battle to protect access to a waterway that is critical to its citizens’ spiritual practices — and their survival, write Pamela King and Jennifer Yachnin.
All but one member of the Supreme Court’s conservative majority ruled Thursday against the Navajo Nation in its fight to ensure that the federal government is legally obligated to address the tribe’s need for water from the dwindling flows of the Colorado River.
Smuggler squeeze
Hundreds of tankers could be barred from European ports as part of a new effort to crack down on illicit sales of Russian crude oil, which Western nations say are helping fund the war in Ukraine, writes Gabriel Gavin.
After weeks of tense negotiations, European Union countries Wednesday signed off on the 11th package of sanctions to be imposed on Moscow in just over a year. The restrictions focus on tightening loopholes in existing rules.
Drought: In Iran, some are chasing the last drops of water.
Hands off: Three states just barred utilities from charging customers for their lobbying costs.
A showcase of some of our best subscriber content.
The Republican presidential primary now has a candidate who has arguably the most successful and aggressive climate record in GOP history.
Analysts say the Mountain Valley pipeline will likely operate at an average of only 35 percent capacity once built, resulting in a “limited impact” on Appalachian gas production.
New York state utility regulators Thursday began planning for a major new underwater transmission project to bring offshore wind energy into New York City.
That’s it for today, folks! Thanks for reading.
- Arianna Skibell @ariannaskibell
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