NC lawmakers don't want pension plan to consider company environment, social records to invest
North Carolina senators passed a bill Tuesday banning the state’s pension plan, or any state government contracts, from considering environmental, social and governance factors, or ESG, in investment choices.
The controversial bill passed along party lines. It now goes to Democratic Gov. Roy Cooper to sign or veto.
How well companies are scored on issues like their history of pollution, corruption, worker abuses, human rights violations and other issues are often lumped together in ESG scores.
Some investment companies offer specialized portfolios that only feature companies with good ESG scores. Republicans have recently started opposing such efforts in states around the country, criticizing it as a “woke” investment strategy.
“It preempts ESG activity within state contracts, employment decisions of the state, as well as really makes sure our pension fund is solvent — and there’s no … issues going on there,” said Sen. David Craven, R-Randolph.
Florida Gov. Ron DeSantis called for a nationwide ban on ESG investing last week, in his speech at the North Carolina Republican Party convention. Some corporations with poor ESG scores, according to some analysts, also are major GOP donors.
Sen. Graig Meyer, D-Orange, said the bill is too vague, potentially leading to headaches for the state workers now charged with figuring out how to try complying with it.
He also said he’s worried that Republican supporters of the bill have previously said they hope it will discourage large North Carolina companies, like Bank of America and Wells Fargo, from attempting to improve their own ESG scores.
“We’re trying to build a strong business and employment climate,” Meyer said. “I do not think the General Assembly should be hostile to those interests.”
Some investors have gravitated toward ESG funds because companies within them tend to make strategic and governance decisions aimed at reducing reputational and operational risks. As a result, those companies are seen as less prone to big swings in stock price.
Over the past year, the S&P 500 ESG index increased 13.1%. That’s better than the broader S&P 500 index, which returned 11.2% during the same period.
Republicans previously tried pushing a more sweeping bill, to ban all banks in North Carolina from considering ESG factors — which would have made it illegal for a bank to refuse to do business with a person or company accused of human rights violations, environmental disasters and more.
That more sweeping bill appeared to face pushback from the N.C. Chamber of Commerce. After it passed a committee earlier this year, three Chamber representatives cornered one of the bill sponsors and spoke for several minutes, later telling WRAL they officially neither supported nor opposed the bill.
It has remained stuck in limbo ever since then, with no further action.
The bill the Senate sent to Cooper’s desk Tuesday is less sweeping. It would only ban state government, and not private companies, from considering ESG factors — when deciding, for example, how to invest the state’s multi-billion-dollar pension fund.
It passed 29-18 along party lines.
UNC and diversity
The ESG was one of a pair of bills discussed Tuesday aimed at combating perceived political correctness in state government.
Senators also discussed Senate Bill 195, which would ban public universities from taking sides “on the political controversies of the day” — similar to other bills, also advancing in the legislature, that would more explicitly ban universities and other parts of state government from endorsing pro-diversity views or hosting anti-racist training sessions.
It failed to pass Tuesday, but it’s likely to get another vote in the near future. The bill’s sponsor, Sen. Amy Galey, R-Alamance, asked lawmakers to vote against it just so that staffers could have time to fix a technical issue in the bill’s wording.
Republican lawmakers have said they see pro-diversity efforts at universities and state agencies as an attack on conservatives and have worked to end such policies this legislative session.
And at UNC-Chapel Hill specifically, the university’s GOP-majority Board of Governors has already passed a similar policy, banning pro-diversity job requirements on campus.
