"STATE REGULATION OF ESG INVESTMENT DECISION-MAKINGBY PUBLIC RETIREMENT PLANS: AN UPDATED SURVEY"

This article comes from Ropes and Gray LLP.

The growing divide in the ESG regulatory landscape in different states became clear with the passage of legislation in Maine and Texas in 2021, which adopted contradictory ESG policies for state pension fund investments. Maine enacted legislation prohibiting investment by the Maine Public Employees Retirement System in the 200 largest publicly traded fossil fuel companies, as determined by the carbon in their reserves. Additionally, the law requires the retirement system to divest from these restricted companies by January 1, 2026. Similar legislation has been proposed in California, Hawaii, Massachusetts and New Jersey, among others, in recent months.
Conversely, the approach Texas took last June (which several other states have considered since) is to prohibit the state from entering into banking contracts with financial companies that boycott firearms or energy companies. In the past few months, state officials in Texas and West Virginia began warning companies that their boycotting activities endanger the companies’ ability to do business with those states. Some government entities have started preemptively excluding targeted financial institutions AS OF AUGUST 2022 from bond deals to avoid having to switch underwriters once the states finalize their list of restricted institutions.

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