Reams of anti-ESG legislation have been proposed recently at both the state and federal levels.  This article from Institutional Investor updates us on the status of state anti-ESG legislative efforts in 2024. And, following “ESG month” in the U.S. House (see this PubCo post) and the advancement of seven pieces of anti-ESG legislation to the House floor, Public Citizen engaged pollsters Lake Research Partners to conduct a survey of voters’ views of anti-ESG bills and the policies underlying them, as discussed in this article on the Harvard Law School Forum on Corporate Governance.

State legislation.  The article in Institutional Investor, based on a survey conducted by Pleiades Strategy, reports that state legislators have introduced hundreds of bills designed to deter or prohibit investments that take ESG factors into account in selecting investment targets. But the success rate has been declining. According to the article, “[i]n 2024, legislators wrote 161 bills and resolutions in 28 states for consideration, a high volume and continuation of a trend in recent years. Out of those proposed, including 58 that carried over from the 2023 legislative session, only six bills passed in 2024 (each in a different state). Five of those six have become law; one is awaiting a governor’s signature. The success rate is worsening. In 2023, 23 laws were passed and 6 resolutions resolved out of 198 total pieces of legislation.” The founder of Pleiades commented that one reason for the decline was pushback by “‘an extremely broad coalition.’” In its report, Pleiades suggested that “anti-ESG policies ‘remain deeply unpopular with diverse constituencies who don’t often see eye to eye on public policy, including business groups, financial officers, investors, labor unions, libertarians, taxpayer advocates, racial justice advocates, and environmentalists.’”

While proponents of the legislation would like to see these bills become law, even bills that are unlikely to pass “can still have a chilling effect and instill fear in companies and organizations.” The founder of Pleiades explained that “‘[b]oards understand that climate risk is financial risk. When legislators are hostile toward responsible investment, companies are more cautious in how they address these real risks. And their shareholders and investors pay the price, through lower returns and higher risks.’” That’s why a broad coalition has eschewed this type of legislation, “highlight[ing] the high costs and impacts of anti-ESG policies to businesses and constituents in formal testimonies, publicly and behind closed doors.” 

Voter survey.  At the behest of Public Citizen, Lake Research conducted a national online survey between November 14 and 22, 2023, of a total of 1,000 likely 2024 voters nationwide.  The survey included an “oversample of 100 NY voters across six swing districts.” The survey results showed that a majority of voters (56%) “oppose legislation to limit the type of information about a corporation’s business record that is disclosed to fund managers, investors and the public, including 38% who strongly oppose. The opposition crosses partisan lines—Democrats 58% oppose, 38% strongly oppose; Independents 63% oppose, 46% strongly oppose; Republicans 52% oppose, 34% strongly oppose.”  And when the survey looks past a general prohibition and asks about limiting disclosure of information about specific tenets of ESG, a plurality of voters also strongly opposed that type of legislation: for example, limiting information about “whether a company utilizes slave or forced labor overseas (61% oppose, 48% strongly oppose); whether the company has a record of product safety violations, including harm to consumers, injuries, or death (56%, 43%); corporate spending on lobbyists (56%, 43%); and gender discrimination within the corporation, including pay equity (56%, 43%). Over half of Democrats and Republicans oppose keeping this information from the public.” 

With regard to making investment decisions, after hearing debate on the topic, 58% of voters said “investment managers should make investment decisions on both a company’s profit margins and potential financial risks, including the company’s environmental, social, and governance record.  A third of voters said that investment managers should make these decisions based solely on profit margins, not social change.” More specifically, according to the survey, a wide majority of voters “think that financial risks related to a company’s environmental record (65%, 34% strong yes) and financial risks to their investment portfolios related to climate change (63%, 33% strong yes) should also be taken into account when making decisions about potential investments, with a third in strong agreement.”  Similarly, most voters say that “labor policies and practices of companies, like protecting workers and the treatment of workers (73%, 41% strong) and information related to company management, like protections against conflicts of interest and oversight of CEOs and senior executives (73%, 38%) should be taken into account” when making decisions about potential investments.

Interestingly, according to the survey, 64% of voters said that they would be more likely to support an elected official who favors requiring corporations to disclose ESG information about their businesses to investors and the public, with 30% much more likely to support them; “[o]nly 18% say they would be less likely to support them (8% much less likely), with 11% saying it would not make a difference.”

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