Anti-ESG legislation is so yesterday

The fossil fuel industry is fighting a desperate rear-guard action across America, trying to stop the flow of big money into green energy investments. Those investments have been brought about by the unrestricted burning of fossil fuels over the last century, which has resulted in cramming Earth’s closed atmosphere with more and more heat-trapping greenhouse gasses every year. The scientific community tells us that the increasingly violent and erratic weather which has wrought death and destruction across the planet will only increase unless the world immediately develops and perfects alternate energy sources. Investor capital has increasingly been flowing toward green energy and the industries that will help humankind cope with a dangerously warming planet.

Every sector of our economy is being affected by the torrential downpours, droughts, tornados, rising ocean levels, and other dangerous and costly effects of climate change. That has resulted in an inexorable march away from fossil fuels. Almost every carmaker is switching to electric cars. Construction standards to protect us against climbing temperatures and destructive weather are commonplace. Many other industries are innovating ways to fight or adjust to climate change. These industries will create the most wealth and become the most attractive investment opportunities as time goes by.

But the fossil fuel folks are not giving up without a fight. When investment firms developed new investment standards to guide the way into the future, fossil fuel interests attacked. Leading the charge have been groups like the State Policy Network (SPN) and its American Legislative Exchange Council (ALEC), which were spawned by the Koch family and its allies to protect the fossil fuel industry and promote big business interests. These groups have been pushing what is called anti-ESG legislation in state legislatures across the country, including Idaho.

Idaho approved legislation last year to limit investment of public money in environmental, social, and governance (ESG) funds and the Idaho House has just passed three bills to further restrict ESG-related transactions by governmental entities. The bills were developed with the assistance of ALEC and are supported by SPN’s Idaho affiliate, the Idaho Freedom Foundation, to slow down the transition to green energy.

Even though ALEC’s fossil fuel hardliners are still fighting the effort to stop further environmental damage from greenhouse emissions, some of its past supporters have awakened to the lucrative investment opportunities offered by industries intent on keeping the Earth livable for future generations. The ALEC board of directors just tabled anti-ESG legislation when the American Bankers Association bailed out, saying “government should not be dictating business decisions to the private sector.”

Anti-ESG legislation has been found to be costly for states because it limits investment opportunities for municipal bonds, substantially increasing borrowing costs. A recent study has shown that six red states could end up paying between $264 million and $708 million more in municipal borrowing costs by passing anti-ESG laws. An Indiana bill ran into trouble when a legislative analysis concluded it would cost the state pension system more than $6.7 billion in lost returns over 10 years.

On February 1, the North Dakota House voted 90-3 to kill an anti-ESG bill. The Wyoming House of Representatives recently killed a couple of anti-ESG bills. GOP members were concerned the legislation would reduce investment in Wyoming. It says something when two of the nation’s top fossil fuel producing states sandbag anti-ESG legislation.

On the other hand, two recent developments are creating a virtual gold rush to cash in on clean energy sources–the war in Ukraine and passage of the Inflation Reduction Act (IRA). The war has opened the world’s eyes to the necessity of developing energy sources that are not controlled and manipulated by autocratic governments like Russia and Saudi Arabia. The IRA, which provides $369 billion for innovating and monetizing climate solutions, will open up a vast new world of lucrative investment opportunities.

The anti-ESG bills currently pending in the Idaho Senate are fighting a losing rear-guard action for the fossil fuel industry, which has brought us great economic gains, together with tremendous environmental challenges. The time has come to embrace the future and defeat efforts to hinder forward progress.

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