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Op-Ed: Red States Have Slowed the ESG Juggernaut

Laws against politicized investing may eventually force the hand of fund managers and blue states.

This article was authored by Andy Puzder for on June 14, 2023

States have seized the initiative in resisting environmental, social and governance investing. These legislative efforts have been so successful that the Harvard Law School Forum on Corporate Governance recently published an article titled “It’s Time to Call a Truce in the Red State/Blue State ESG Culture War.” ESG advocates are understandably concerned that what looked like a juggernaut is suddenly facing stiff opposition. But that’s no reason to slow the effort. ESG either protects the retirement assets of hard working Americans or, as states are increasingly concluding, it doesn’t.

Last year the American Legislative Exchange Council and the Heritage Foundation jointly proposed model legislation to stem the rise in ESG investing. Their proposal has served as the basis for states to require that asset managers focus exclusively on maximizing returns. These 10 states combined—Arkansas, Florida, Kansas, Kentucky, Indiana, Montana, North Dakota, Tennessee, Utah and West Virginia—hold more than $500 billion in pension fund assets.

The bills have varied in language. Eight states have explicitly named ESG when outlining their new investing restrictions. Florida, Indiana and Kansas also prohibit investing to advance “social, political, or ideological interests.” Montana and West Virginia add the phrase “or other similarly oriented considerations” to their ESG restrictions.

All are clear and consistent in their intention: Those responsible for investing and shareholder voting must act solely in the financial interests of the pension fund’s beneficiaries. ESG and other forms of politically motivated investing are inconsistent with that duty.

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