Senate Bill 833 would ban from Texas any insurance companies that use environmental, social and governance (ESG) metrics, like a company’s exposure to climate risk, in setting prices or deciding whether to offer coverage.
The oil and gas industry is a financial heavy-hitter in the state, paying nearly $25 billion in state and local taxes and state royalties in 2022, according to the Texas Oil and Gas Association.
While the bill is still in committee, it is part of a wider move by conservative state legislators and attorneys general against ESG efforts.
On Wednesday, for example, Indiana joined 16 other states seeking to restrict the use of ESG across the country.
The 17 state attorneys general demanded that the Federal Energy Regulatory Commission (FERC) prohibit asset manager BlackRock from applying ESG criteria to the energy companies it invests in.
FERC — an independent federal agency within the Department of Energy — must approve any “any public-utility holding company seeking to acquire more than $10 million in voting securities in another utility,” the letter explained.
Appealing to FERC gives the state attorneys general an opportunity to attack BlackRock’s actions even in Democratic-controlled states.
That letter coincided with a hearing around ESG at the GOP-controlled House Oversight and Accountability Committee on Wednesday.
At the hearings and in letters — both to FERC and submitted to the panel — GOP attorneys general and members like Rep. Anna Paulina Luna (R-Fla.) sought to cast ESG investing as an assault on conservative beliefs.
“Investments made on behalf of Americans by asset managers should serve the interests of investors, not woke ideology,” Luna said at the hearing.
But economics, not policy, is the main driver behind ESG, Oversight Committee Ranking Member Jamie Raskin (D-Md.) told the panel.
“It makes sense to say in the free market that no one should be forced to do the demonstrably right thing with their money,” Raskin said. “But it is appalling to say that everyone should be forced to do the demonstrably wrong thing with their money.”
The difficulty of distinguishing between political activism and economic choice may swallow any such proposed legislation.
The Texas bill, for example, may contain a significant loophole: Applying ESG criteria could be permissible if there’s a valid “business purpose” to do so — or if it’s “relevant to risk,” as Bloomberg Law reported.
But ESG is all about risk and company practices that may cost money down the line, Illinois State Treasurer Michael Frerichs told the Oversight Committee.
“If you’re investing in a car company, it’s thinking about whether that company is aligned with market expectations and preparing for the shift to electric vehicles,” he said, saying GOP attacks on ESG “may cost taxpayers and pensioners millions, and in some cases billions of dollars.”
