Preparing for the increasingly complex maze of state-level regulations regarding ESG-based investments.

Amid growing interest by some investment managers to consider environmental implications and anticipated regulatory change in their portfolios, Environmental Social Governance (ESG) investments are also increasingly catching the attention of state regulators. Along with public warnings from state attorneys general, some states are reacting by barring major banks from government contracts and pulling money from asset managers they deem as overstepping on climate action.

Before determining an investment strategy, companies should consider the recent flurry of state legislation, especially around climate change, governance and social impacts. For example, this year, West Virginia enacted a law giving the state treasurer the authority to bar financial institutions from doing business with the state where they are “boycotting” fossil fuels. Texas and Oklahoma have enacted similar laws while comparable bills are pending in approximately 15 other states. Additionally, the governor of Florida recently introduced legislative proposals that would ban state pension funds from selecting investments based on ESG factors.

On the other side of the political spectrum, several other examples demonstrate the marked uptick in state-level legislative activity occurring surrounding ESG investment decision-making.

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