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USA: latest ESG developments in West Virginia, Texas, Louisiana, Indiana and Florida

West Virginia and Texas bar financial firms over deemed fossil fuel boycotts 

In July 2022, the West Virginia State Treasurer published a Restricted Financial Institution List, barring several prominent financial institutions from entering into banking contracts with West Virginia state entities. The list comes after state lawmakers passed Senate Bill 262, which authorizes the State Treasurer to identify and publicly list financial institutions “engaged in boycotts of energy companies” in order to exclude them from the selection process for state banking contracts.

Similarly, in August, the Texas Comptroller announced a list of ten financial institutions and approximately 350 funds that the Comptroller stated refuse to deal with companies that “engage [...] in the exploration, production, utilization, transportation, sale or manufacturing of fossil fuel-based energy.” Texas state government entities must divest from the listed companies and are prohibited from contracting with them. At least two listed financial institutions have said they will appeal their inclusion in the Texas list, both stating that the companies are not boycotting energy companies.

Also, in August 2022, Republican attorneys general from 19 states sent a letter to the CEO of a prominent financial institution, stating that the institution’s “alignment of engagement priorities with environmental and social goals” and “actions on a variety of governance objectives” may violate multiple state laws. 

Florida Eliminates ESG considerations from state pension investments 

In August 2022, Florida Governor Ron DeSantis and Trustees of the State Board of Administration (the “SBA”) passed a resolution mandating that investment decisions “be based only on pecuniary factors [which] do not include the consideration of furtherance of social, political, or ideological interests” and that the SBA “may not sacrifice investment return or take on additional investment risk to promote any non-pecuniary factors” when investing or proxy voting. The resolution also instructs the SBA to conduct a review and prepare a report on governance policies discussing the voting practices of the Florida Retirement System Defined Benefit Pension Plan.

The Governor has also announced plans to amend Florida's consumer protection law to prohibit allegedly discriminatory practices by large financial institutions against consumers for their “religious, political, or social beliefs,” described as “ESG social credit score metrics.”

State Attorneys General issue guidance on ESG investing and fiduciary duties

These developments dovetail with opinions issued by the Attorneys General of Louisiana and Indiana stating that ESG investing for state pension funds may violate state fiduciary duties applicable to investment advisers. 


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