The North Carolina Senate voted Tuesday to ban the consideration of environmental, social and governance (ESG) scores in state hiring and investment decisions.
The bill passed the Senate along party lines with a 29-18 vote and was sent to the desk of Democratic Gov. Roy Cooper, a supporter of ESG. The North Carolina House approved the legislation in a 76-41 vote last week.
The vote totals in both chambers suggest a veto from Cooper could be overridden.
State treasurer Dale Folwell, who manages one of the largest state pension funds in the U.S., said he supports the legislation because "people want their government to work."
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"This bill is the perfect example of how elected leaders can get together and make good policy so that future treasurers will not be able to use beneficiaries’ money to promote a political agenda," said Folwell, a Republican gubernatorial candidate who has criticized ESG policies as "wacktivism."
The bill does not ban private companies from considering ESG factors, like how a corporation interacts with the environment, a company’s relationship with its stakeholders and community, and the ethics of a company’s leadership.
Critics say ESG investments allocate money based on political agendas, such as a drive against climate change, rather than on earning the best returns for investors and pensioners.
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North Carolina is one of many states attempting to fight ESG. Gov. Ron DeSantis, R-Fla., signed a bill in May barring state officials from investing public money to promote ESG goals and prohibiting ESG bond sales.
DeSantis teamed up with 18 GOP governors in March to reject President Joe Biden's ESG "agenda," claiming the push is a "direct threat" to the economic freedom of American retirees.
Thirteen states have also considered measures to prevent discrimination against the fossil fuel industry, while three states have introduced bills that would restrict both disadvantaging fossil fuel companies and considering ESG factors in state investment decisions.
Ten states are considering bills to promote ESG against the fossil fuel and firearm industries, as well as private prisons, though none have been enacted.
In April, North Carolina Republicans tried to pass a more sweeping bill which would have banned all banks in North Carolina from accounting for ESG factors, but the legislation faced pushback from the N.C. Chamber of Commerce.
Democratic North Carolina state Sen. Graig Meyer said he is concerned the bill passed Tuesday will discourage large North Carolina companies, like Bank of America and Wells Fargo, from attempting to improve their own ESG scores.
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"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."
