The Anti-ESG movement suffered a defeat as Missouri’s new ESG investing laws have been struck down in federal court. Missouri sought to regulate private investment in ESG through “notice and consent” laws. These laws would have required clients to sign acknowledgments before financial firms would be allowed to invest their money in funds that considered ESG factors in their investment decisions. The laws were challenged by the Securities Industry and Financial Markets Association (SIFMA), an industry group representing investment professionals. The court recently issued an Order granting SIFMA’s Motion for Summary Judgement and issuing a permanent injunction against the law. Pensions & Investments summarizes the case stating:
“[SIFMA argued] that the rules were preempted by the National Securities Markets Improvement Act of 1996 as well as the Employment Retirement Income Security Act of 1974. They also asserted that the rules violated First Amendment protections against ‘compelled speech’ and that the rules are ‘unconstitutionally vague.’
The Missouri court supported SIFMA on all four counts, citing among other things that the rules imposed “new and different state regulatory obligations that are not required by federal law.”
The anti-ESG movement has consistently targeted ESG investing in the US. Various states have passed laws that prohibit state agencies from investing in funds that consider ESG factors in investment decisions. Some states have even created “banned lists” of financial services firms they refuse to do business with because of their involvement in ESG investing. The Missouri decision shows the limits of these investment laws. While Missouri is bound to take the issue up with the Eighth Circuit Court of Appeals, the trial court’s findings are not encouraging for the anti-ESG movement.
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