The anti-ESG movement is once again grabbing headlines for their latest attempt to be taken seriously. A lawmaker in New Hampshire introduced a bill banning state-controlled investments from considering environmental, social, or governance factors in their investment decisions. The penalty for a fund manager that steps out of line? A felony charge that could carry up to 20 years in state prison. Matt Levine recently wrote an opinion piece for Bloomberg on the madness stating that:
“I’m sorry, this is so stupid. ‘ESG’ is essentially about considering certain risks to a company’s financial results: You might want to avoid investing in a company if its factories are going to be washed away by rising oceans, or if its main product is going to be regulated out of existence, or if its position on controversial social issues will cost it sales, or if its CEO controls the board and spends too much corporate money on wasteful personal projects.”
I don’t think we need to panic just yet. While the proposal is being put forward in a Republican-controlled legislature, it’s unclear if there is political will to pass such a law. However, because of the viral nature of anti-ESG proposals, I wouldn’t be surprised if we see a state like Florida or Texas pick the idea up and try to run with it. The Bloomberg article points out that if such a law were to be passed, it would substantially hinder funds from considering important governance information in their investment decisions, making it difficult or potentially impossible to adequately deliver on their fiduciary duties.
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