Efforts by Republican state lawmakers to boost fossil fuels by banning their governments from doing business with sustainability-minded companies have the potential to cost states millions, according to a newly released report. study.

The researchers looked specifically at the potential effects on Florida, Kentucky, Louisiana, Missouri, Oklahoma and West Virginia if they passed Texas-like legislation limiting investment options in municipal bonds and found that it could cost them between $264 million and $708 million in additional interest payments. The study noted that states had not passed such extensive legislation.

The six states are between two dozen that last year issued proposed or passed legislation that prohibits state government entities from doing business with financial firms that take into account corporate, social and environmental governance (ESG) when making investment decisions as anti-ESG efforts spread from state treasurers and attorneys general to governors and legislators. Republican lawmakers refer to ESG as the “boycott” of energy companies and argue that hedge funds are pursuing a liberal agenda that hurts jobs.

The Philadelphia-based Econsult Solutions study was commissioned by Project Sunrise for two groups focused on environmental policy, As You Sow and Ceres Accelerator for Sustainable Capital Markets. Expands into a Wharton Business School study published in July that focused on the cost to Texas after anti-ESG laws restricting business with banks that have policies against fossil fuels and firearms took effect there in 2021.

Steven Rothstein, managing director of Ceres Accelerator, calls the anti-ESG bills and changes to state pension funds “shortsighted” and “political.” He argues that these approaches will only hurt taxpayers.

“In the long run, we are concerned that those taxpayers and pension holders will be hurt with increased risk and low returns,” he said.

With Texas leading the way as the first state To enact anti-ESG laws, the study authors assumed the passage of similar laws and the same bond market restrictions in the six states they chose to examine. They used data on municipal bond transactions from January 2017 to April 2022 and looked at changes in Texas bonds “that occurred during the last 12 months of the period corresponding to the implementation of the new laws.” The six were chosen because they had had more discussion on anti-ESG bills and administrative actions on ESG issues.

the warton study found that Texas paid higher interest rates due to less competition after major banks were forced to leave the state. Similarly, the Econsult study found that interest costs for its six states could skyrocket if they underwent Texas-like changes that impact municipal bonds in addition to state stocks.

  • In Florida, costs would range from $97 million to $361 million.
  • In Kentucky, the costs would be between $26 million and $70 million.
  • For Louisiana, the cost would fall between $51 million and $131 million.
  • In West Virginia, interest costs would be between $9 million and $29 million.
  • In Missouri, taxpayers would see interest increase from $32 million to $68 million.
  • Oklahoma would have $49 million in additional costs.

“That is a burden on all the taxpayers, all the teachers, all the senior citizens in those states,” Rothstein said. “That obviously doesn’t help anyone. They’re simply higher interest costs, and that’s because fewer bankers can bid on that job. That is one of the risks. And besides, they are not going to consider climate risk either.”

Rothstein added that after the pandemic reminded people just how interconnected the supply chain is, it would be unwise to dismiss consideration of climate risk, in addition to other ESG factors, and that ESG factors are just one set of considerations that investors they do among many. .

Kentucky Y West Virginia they have now enacted bills that restrict various government agencies and boards from doing business with financial institutions that “boycott” fossil fuels, although they do not refer to municipal bonds nor are they as broad as Texas legislation.

In Missouri, state Sen. Mike Moon, R-Ash Grove, has already filed an anti-ESG statement. legislation this session, similar to a bill he introduced last year that restricted “public bodies” from contracting with companies that used “ESG scoring.” Is one of Three Senate bills targeted at what state officials have termed “woke” investment. Last year, then-state treasurer Scott Fitzpatrick pulled $500 million at BlackRock pension funds, the world’s largest asset manager, saying the company had shown it would “prioritize advancing a prudent political agenda” over clients.

Michael Berg, political director for the Sierra Club’s Missouri chapter, told States Newsroom that he sees these efforts as a way for the fossil fuel industry to “buy time” and get in the way of any progress in addressing climate change. .

“This is an organized national campaign pushed by Republican Party politicians and dark money conservative groups controlled by billionaires and fossil fuel interests,” he said. Berg pointed to the influence of the State Financial Officers Foundation, a Kansas nonprofit that has been influential in pushing for anti-ESG policy.

According to In a New York Times investigation, the group coordinated with the Heartland Institute, the Heritage Foundation, and the American Petroleum Institute to push for anti-ESG policy approaches beginning in January 2021.

“They (lawmakers) say they don’t like BlackRock looking at anything but immediate returns, but we have to see if they’re really costing Missouri retirees because of political decisions masquerading as opposing political decisions,” Berg said.