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Last week, the Ohio House of Representatives passed an anti-ESG investment bill that limits the state’s five public pension funds from environmental, social and governance investing.
Ohio, like other GOP-led states, is barring ESG factors from being an influence in pension funds in the state. So far, 17 states have already passed laws to limit ESG investing, and there have been over 150 bills on this issue in 37 states.
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The legislation also applies to numerous state college and university endowments. The bill requires that the board of trustees of an Ohio-based endowment will not be allowed to “permit any person or entity to which it delegates the management of part or all of its endowment portfolio to engage in or promote such decisions or policies,” the legislation states.
In the case of state colleges and universities, the bill also gives trustees the authority to reject a bequest to their endowment “because the bequest specifically requests the donation be used with the primary purpose of influencing any social or environmental policy, including by attempting to influence the governance of any corporation,” but if trustees accept a bequest with such conditions, they must comply with any conditions of the request regarding its purpose.
The Department of Labor’s ESG rule that permits ESG factors to be considered when selecting investments took effect in 2023, but was quickly challenged in court by 25 GOP-led state attorneys general. In March 2023, the House and Senate voted to block the sustainable investing rule, which was then vetoed by President – the first veto of his presidency.
The ESG rule ended a Trump-era ban on retirement investment managers considering ESG factors. Then, 26 GOP-led states argued to a federal appellate panel July 9, 2024 to get the rule overturned. However, now that the Supreme Court overturned the Chevron case June 28, which affects how federal agencies defer cases where Congressional statutes are ambiguous, the ESG case has now been sent back to the Texas district court.
Related: BlackRock, Vanguard, State Street sued by 11 GOP states, in ESG lawsuit
Earlier this month, asset management firms BlackRock, State Street and Vanguard were sued by a group of 11 Republican states, led by Texas, for allegedly breaking antitrust laws by reducing coal production and boosting electricity prices through their investments, in the highest profile lawsuit yet against the beleaguered environmental, social and governance goals industry, seeking billions in damages.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
