Over the past few years companies and institutions, such as investment banks, have enacted policies referred to as Environmental Social Governance (ESG) policies. These policies place limits or restrictions on the extent that companies associated with firearms, oil, gas, and coal industries can engage in business with these companies and institutions. In response, various state legislatures have passed legislation preventing municipalities and public entities in the state from engaging with companies that have ESG policies. This ‘anti-ESG’ or ESG Boycott legislation has the potential to cost state taxpayers millions of dollars. The legislation has been accompanied by actions at other levels of government, including state executive actions by treasurers and governors, legal action by state attorneys general, and even the threat of federal action in Congress. At the tip of the spear of the state efforts to pressure financial risks of such issues as climate change, gun violence, and workers’ rights is the threat of pulling state funds from their asset manager.
In 2023, ESI was commissioned by the Sunrise Project to calculate how potential legislation could impact taxpayers. First, ESI analyzed the impact of Anti-ESG legislation from Texas, which currently serves as a base template for legislation introduced in many other states. ESI interpolated these results to six states which have passed or have pending similar legislation: Florida, Kentucky, Louisiana, Missouri, Oklahoma, and West Virgina. We found that in total, this legislation could cost taxpayers across these states over $700 million, through lost interest on municipal bonds.
By limiting competition for government services, States are closing the free market and passing the costs onto the taxpayer, with a methodology that does not necessarily factor these costs into the final result.