As state legislatures gear up for their upcoming legislative sessions, environmental, social, and governance (ESG) investing remains a contentious topic at the forefront of their agendas. The prefilings of bills ahead of the 2023 sessions offer valuable insights into the potential direction of ESG legislation at the state level.
A total of 26 states have proposed ESG-related bills since the start of the legislative session, with multiple states introducing bills that either restrict or encourage ESG investing. This report examines three key trends observed in the prefiled bills, shedding light on the likely focus areas for ESG investing legislative action in the 2023–2024 sessions.
A noteworthy trend emerging in the 2023 legislative session is the introduction of bills seeking to limit corporate discrimination based on ESG scores. This represents a relatively new type of ESG investing bill. States that encountered obstacles in passing anti-ESG legislation in previous sessions have explored alternative avenues to implement regulations.
The ESG investing landscape is poised for regulatory changes in 2023, potentially affecting a wide range of businesses. While some regulations target financial services companies exclusively, others, such as the emerging Prohibitions on ESG Discrimination, aim to curtail the influence of ESG factors on any business operating within the state. It is important to note that state-level regulations with divestment provisions typically apply only to state funds and public retirement plans, as federal law pre-empts states from regulating private retirement plans.
