West Virginia implements anti-ESG legislation, Idaho set to follow

A bill in West Virginia that could see financial institutions blacklisted if they are found to have engaged in boycotting energy companies has come into effect today (Friday 10 June). 

First introduced in January 2022, Senate Bill 262 will allow the state treasurer’s office to create a “Restricted Financial Institution List” consisting of financial institutions that have been identified as refusing to deal with or terminating business activities with energy companies “without a reasonable business purpose”.

All companies involved in the exploration, production, utilisation, transportation, sale, or manufacturing of fossil fuel-based energy are covered by the legislation. 

Once financial institutions are placed on the list, West Virginia state treasurer Riley Moore will be authorised to exclude them from the selection process for state banking contracts. He will also be allowed to require, as a term of a banking contract, an agreement by the financial institution not to engage in a boycott of energy companies. 

A spokesperson for Moore told Responsible Investor that the office will begin “notifying financial institutions if they have engaged in activities that would warrant their inclusion on the Restricted Financial Institutions List that was created by Senate Bill 262”. 

Under the law, they will have 45 days from receipt of the written notice before being placed on the list, during which time they can provide further information about their activities. If they can demonstrate they are not engaged in a boycott of energy industries, they will not be placed on the list. 

“Senate Bill 262 is our state’s way of calling for a return to true capitalism, where investment decisions are decided by honest analyses of business decisions, while standing up to the so-called ‘woke capitalists'”

Rupie Phillips
West Virginia State Senator

To assess an institution’s inclusion on the list, the Office will review publicly available statements and information available from the financial institution demonstrating their investment policies or activities toward fossil fuel industries and companies. 

Speaking when the bill initially passed, Moore said: “The current situation in Europe clearly demonstrates the dangers of letting woke capitalists weaken and destroy our domestic energy producers. It’s time to fight back against those who are trying to wipe out thousands of middle-class jobs, and once again put America first and restore our energy independence.”

The lead sponsor of the bill, West Virginia senator Rupie Phillips, wrote: “Senate Bill 262 is our state’s way of calling for a return to true capitalism, where investment decisions are decided by honest analyses of business decisions, while standing up to the so-called ‘woke capitalists’ who are trying to use corporate power to advance a radical social agenda.”

The law applies to financial institutions that have banking contracts with the Treasurer’s Office and the Treasurer, not to pensions or other investment funds managed by other boards across West Virginia’s state government. 

Similar legislation has already been passed in Texas and Oklahoma. 

RI has extensively covered the rise of anti-ESG sentiment and legislation in US states, a movement in which Treasurer Moore has played a leading role. 

In May 2021, he announced a 15-state coalition of state Treasurers and financial officers committed to reforming their state banking contract process to potentially limit business with banks engaged in boycotts of coal, oil and natural gas companies. 

And in April, the Treasurer came out swinging against state-level ESG assessments by S&P Global, saying that the provider should stick to issuing credit ratings based on “valid, objective financial metrics”.

On whether there was any planned follow-up, the spokesperson for Moore told RI: “The Treasurer has discussed the matter with the Governor’s Office but don’t know as of yet if there’s a specific follow-up action planned.” 

Meanwhile in Idaho, legislation restricting ESG investments by state funds is set to come into effect on 1 July. 

The bill will ban “public entities engaged in investment activities” from considering environmental, social, or governance characteristics “in a manner that could override the prudent investor rule”. Public entities serving as fiduciaries to select investment options for investors will be allowed to offer “environmental, social and governance preferred investment alternatives”, but with the proviso that such investments “shall not be required and sufficient alternatives must be also offered”.

A spokesperson for state Treasurer Julie A Ellsworth told RI: “State agencies that SB1405 affects are currently working on their implementation plan. Our office will be releasing a statement on how we plan implementation in a few weeks.”

And in Arizona, a representative for attorney general Mark Brnovich told RI that his investigation into ESG investing practices by major firms, including their membership in the investor led initiative Climate Action 100+, was ongoing. 

When it was announced in November, the attorney general wrote: “My office is committed to fair business practices and competition. We will take action to ensure companies are not operating in the shadows to move a political or woke agenda.” 

The representative could not provide a date for when an update was expected.