Republican Governors Seek to Block ESG Usage in State Investments and Institutions

In a Joint Policy Statement, 19 Republican governors committed to preventing the "proliferation of ESG throughout America," which they said is a "direct threat to the American economy, individual economic freedom, and our way of life."

The governors agreed to lead state level efforts to block the use of ESG-based investing in:

• state and local systems in all (i) investment decisions, (ii) issuance of bonds, and/or (iii) investing of taxpayer money by state fund managers to ensure that only financial factors are considered; and
• the financial sector by banning (i) the use of "Social Credit Score" in banking and lending practices and (ii) discrimination against customers for their religious, political or social beliefs.

As previously covered, in November 2022 the DOL adopted a final rule allowing ERISA plan fiduciaries to consider ESG factors when selecting investments and exercising shareholder rights. Subsequently, Congress, using its authority under the Congressional Review Act, adopted a statute that would negate the DOL Rule. The governors criticized President Joseph R. Biden for threatening to veto that legislation. They argued that the goal of investment advisers should be to maximize returns to investors.