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Anti-ESG bills roll out to target “the weaponization of capital”

The anti-woke rhetoric was thick on Capitol Hill, but the bills would change little in how funds are managed and contracts are awarded in Utah.

(Christopher Cherrington | The Salt Lake Tribune) Utah's state treasurer has joined treasurers in other red states in challenging financial firms over their environmental and social agendas.

Utah legislators took aim this week at companies they fear are distorting financial markets with their environmental and social agendas, but the legislation they rolled out doesn’t appear to affect how Utah currently does business.

“What we’ve seen lately is an effort to weaponize capital,” said Rep. Ken Ivory, R-West Jordan, who is sponsoring one of the anti-ESG bills. ESG stands for environmental, social and governance, and it has become widely used in the financial and corporate worlds to gauge companies on their approach to climate change, social justice and other factors. More than 90% of S&P companies do some kind of ESG reporting.

Ivory’s bill and others reflect a broad effort from Republican-controlled states to counter lenders and asset managers they say are abandoning fossil fuels and other industries for political reasons instead of following their fiduciary duty to maximize financial returns. Fossil fuel-producing states like Texas and West Virginia already have similar laws and have identified financial firms the state won’t do business with. The firms counter that it would be financially irresponsible to ignore ESG considerations.

The bills are the culmination of months of legislative effort. There were more than 35 bill requests for anti-ESG legislation, but only four made it to introduced bills.

In addition to Ivory’s bill, Sen. Chris Wilson, R-Logan, is sponsoring SB96 and SB97, companion bills intended to ensure any government investments are managed to those fiduciary goals and to limit government contracts to companies who will commit to not boycotting fossil fuel companies, gunmakers and others.

Marlo Oaks, Utah’s state treasurer who has been a leader in the anti-ESG charge, praised the legislation in committee hearings on Capitol Hill, but he said in an interview that, in terms of how Utah government entities currently invest funds and contract for services, not much will change if these bills pass.

(Rick Egan | The Salt Lake Tribune) State Treasurer Marlo Oaks is pleased with legislation aimed at restricting ESG investments, even though he acknowledges none of the bills would change the way Utah does business. Here, Oaks addresses fellow Republicans at the Davis County Republican nominating convention at Farmington High School, on Saturday, March 26, 2022.


Ivory’s HB449 essentially opens a new front in the anti-ESG battle by relying on an antitrust argument. Titled “Unlawful anticompetitive activity amendments,” the bill says companies that join together to deny services to certain companies or industries would be guilty of violating Utah’s antitrust law. Oaks said he doesn’t know of any other state trying the antitrust approach.

The bill singles out certain companies as vulnerable to such actions and calls them “monopolized companies.” They are fossil fuel producers, gunmakers, companies that decline to have diversity and inclusion goals, companies that do not “facilitate or commit to facilitate access to abortion or sex characteristic surgical procedures.”

“Large investment companies are getting together to destroy an industry for political purposes,” said Ivory.

“It started with the UN,” said Ivory, “and it’s branched out to others in what we’re coming to see as ESG and other actions where major companies sign into things known as Glasgow Financial Alliance, The Net Zero Bankers Alliance, the Net Zero Asset Management Alliance, The climate 100. They actually sign pledges to dry up capital, products and services they don’t like for a political agenda.”

Three of Utah’s largest private employers — Wells Fargo, Chase Bank and Goldman Sachs — are members of the United Nations Net Zero Bankers Alliance.

In floor debate Thursday, Rep. Brian King, D-Salt Lake City, said the fact that the bill singles out industries and ideas that Republicans favor shows that it would do exactly what it purports to combat: it would inject a political agenda into the financial process.

‘It’s not monopolistic behavior’

“Environment social and governance criteria is an investment criteria. It’s used not by government. It’s used by investors and companies those investors hire,” said King. “ ... It’s not monopolistic behavior. It simply isn’t.”

“This has been created as a bogeyman to focus on things they dislike,” King added.

Addressing House Speaker Brad Wilson directly, King said he has heard from constituents in the business community who are pleading with him not to pursue the anti-ESG agenda because they say “these investment criteria have value ... They say, ‘We’re trying to do it because it attracts the best employees. We’re trying to do it because it creates the best business climate for us.’”

Rep. Mike Peterson, R-North Logan, was a strong supporter of the bill. He said he has done his own research on ESG, and “I’m convinced that ESG is not a conspiracy theory. It’s a conspiracy truth.”

‘Politics being forced on us’

Rep. Jefferson Moss, R-Saratoga Springs, disputed that the bill was politically motivated. “This is pushing back on the politics being forced upon us.”

Rep. Joel Briscoe, D-Salt Lake City, said, “One of my concerns with our discussion of this bill is the assumption that the people who are promoting ESG are intending to destroy other companies. I don’t believe that’s what they intend to do. I don’t think that’s why many companies adopt ESG standards.”

Briscoe acknowledged coal miners in Emery County, “but there’s another thing we don’t often talk about,” noting Utah’s strong growth in employment in Utah’s solar industry.

The bill easily passed the House Thursday and now goes to the Senate.

SB96 (“Fiduciary Duty Modifications”) is aimed at ensuring that funds invested by any government entity in Utah are managed “with the sole purpose of maximizing the risk-adjusted return on the investments.”

“ESG is an attempt to bypass democracy,” Wilson said in introducing the bill to the Senate Business and Labor Committee. He and Oaks told the committee large financial firms are using their financial leverage to pursue a political agenda instead of maximizing returns.

This bill says that any funds invested by any state entity (including cities and counties) must “make investment decisions with the sole purpose of maximizing the risk-adjusted return on the investments.” It also requires that the state entity maintain voting control of its shares in any shareholder elections instead of giving other entities a proxy to vote for them.

The bill makes no mention of ESG or any specific industries, but those opposed to ESG see proxy voting as a way large financial managers are pushing an ESG agenda.

But it’s not clear if SB96 will change anything in Utah if it becomes law. No one is pointing to a Utah government entity that is not maximizing its risk-adjusted returns for any reason.

‘Reiterating what we’re already doing’

“We’re generally in a good position,” Oaks said. “This bill is reiterating what we’re already doing in the state. We’re focused on our fiduciary responsibilities.”

He also said net-zero pledges or anti-gun statements signed by companies are not by themselves evidence that firms should be excluded. He said Utah government entities have a responsibility to get the best terms they can get on an investment or contract, and that could mean working with a company that has signed such pledges. “I have a fiduciary obligation to get the best deal that I can given all the circumstances.”

Wilson’s other bill, SB97 (“Public contract requirements”), would prohibit government entities in Utah from contracting with companies that have boycotts against other companies because those other companies are in certain industries, including fossil fuels, timber, mining, agriculture and firearms industries. The bill builds on 2021 legislation that prohibited entities from contracting with companies that boycott the State of Israel.

Texas and West Virginia have put together lists of financial firms that state entities aren’t allowed to contract with. West Virginia’s list includes Wells Fargo, Chase and Goldman Sachs.

Texas pays a price

Limiting the pool of acceptable financial firms can make it more expensive to issue municipal bonds. King pointed to one study by researchers at the University of Pennsylvania and the Federal Reserve Bank of Chicago that showed Texas entities will pay more interest because they couldn’t use the lowest priced financial firms.

“Overall, our estimates imply Texas entities will pay an additional $303–$532 million in interest on the $32 billion in borrowing during the first eight months following the Texas laws,” the study said.

Oaks said there are no plans to create similar lists in Utah. Instead, SB97 would require every company contracting with a state entity to acknowledge in writing as part of the proposal process that they are not boycotting those industries. Given that no financial firm considers itself to be boycotting the industries, it’s not clear how this legislation will force any changes in who gets the contracts.

(Francisco Kjolseth | The Salt Lake Tribune) Rep. Cheryl Acton, R-West Jordan, has sponsored a bill to outlaw "social credit scores" that rate people on their behavior. If the measure passes, there will be no impact because Utah has no social credit score system. Here, Acton speaks at an anti-abortion media event in the Utah Capitol rotunda on June 19, 2019.


Both SB96 and SB97 passed the Senate Thursday and are headed to the House.

After pushing back on earlier versions of the bills, representatives for Utah’s banks, credit unions and industrial banks were satisfied that later versions would not present problems for them.

The fourth bill, Rep. Cheryl Acton’s HB281 (”Social Credit Score Amendments”) outlaws the use of “social credit scores” like those said to be used in China to rate people on their behaviors. Again, there appears to be no practical effect if the bill passes because there is no social credit score system in Utah.