As interest in ESG investing has increased, ESG legislation has become more prevalent on both the state and federal levels. Read our team’s analysis of the national landscape of these laws in the first six months of 2023.
What is ESG Investing?
Environmental, social and corporate governance (ESG) is an investment strategy involving the consideration of a company’s environmental impact, social impact and governance history. These considerations are used to determine whether and where they will invest funds. ESG is also referred to as socially responsible investing or sustainable investing.
Interest in ESG investing has grown in the private sector. As a result, many large investing firms have begun to offer information about the impact of investments. This offers flexibility for investors to put their money towards “better” investments. The European Union (EU) has been the epicenter of ESG investing. The EU has taken steps to improve corporate transparency and aid ESG. For example, the EU increased reporting requirements for financial firms and companies.
ESG Legislation and Regulation
Regulatory action on ESG investing in the United States had been sparse. However, there has been an increase in legislation on ESG investing. This growth has occurred at both the state and federal levels. The trend is driven by recent actions by the Biden administration as well as Republicans’ focus on the so-called “culture wars.”
Over two-thirds of U.S. state legislatures have considered anti-ESG legislation in 2023, and 14 states have enacted legislation restricting the use of ESG factors in public investments and procurements. On the other side of the debate, just one pro-ESG bill has become law and only 11 states have even considered such legislation. While consumer demand for ESG investing has grown, the data in this report shows a wave of anti-ESG legislation rising to challenge that trend.
The Plural team sought to better understand legislation regarding ESG investing. To do so, we analyzed the 2023 legislative sessions of all 50 states, US Congress and Washington, DC. This data is up-to-date as of July 19, 2023.
Key Findings
ESG investing has become a prevalent topic of discussion in state legislatures across the country. Understanding the state-of-play in these debates will allow you to be better prepared for their next iterations.
Overall, it’s unclear how states will progress in this space as well as how new laws will impact our economy at-large. At Plural, we’re committed to increasing government transparency. This involves shedding light on laws under consideration and analyzing their impact on our communities.
