North Carolina anti-ESG bill becomes law
July 6, 2023
A North Carolina anti-ESG bill has become law after a Democratic veto was overturned.
The new law prohibits state agencies and state pension plan fiduciaries from considering ESG measures when making investment decisions.
The North Carolina treasurer is the sole trustee of the $113.3bn North Carolina Retirement Systems, Raleigh.
The bill states that the North Carolina Treasurer can only assess investments based on “pecuniary factors,” or factors with a concrete effect on the financial risk and return of an investment.
The bill also includes legislation to block state bodies from considering ESG factors when awarding state contracts, as well as hiring, firing and evaluating employees.
The bill was vetoed by Democratic governor Roy Cooper on June 26, but his veto was overridden by the state Senate in 29-16 vote.
The bill is the latest in a series of similar laws being passed in the US as ESG becomes an increasingly politicised issue. Republican-backed states are moving to reintroduce Trump-era policies that have been overturned under the Biden administration.
These include rulings such as the Financial Factors in Selecting Plan Investments, which stipulated that retirement funds may not make ESG investments unless financial returns or risk mitigation was being clearly prioritised. The ruling was heavily criticised by Democratic lawmakers when it was introduced during Trump’s presidency and has since been overturned.
In Florida, Republican Governor DeSantis signed a similar bill into law in May this year, requiring state entities to make investment decisions based solely on “pecuniary factors”.
In March, fiscal analysis by the Kansas Public Employees Retirement System (KPERS) found that Kansas’ anti-ESG bill, which was then passed into law in April, could lower state pension system returns by $3.6bn over the next decade. The findings also showed that the bill would cost KPERS $1.14bn in forced divestitures.
In a statement after vetoing the North Carolina bill, Governor Cooper said: “This bill does exactly what it claims to stop. For political reasons only, it unnecessarily limits the Treasurer’s ability to make decisions based on the best interest of state retirees and the fiscal health of the retirement fund.”
The veto override was supported by Treasurer Dale Folwell, who is running as a Republican candidate in the 2024 North Carolina Governor race.
Last Updated: 6 July 2023