An Opportunity for Centrism Emerges as Anti-ESG Hits a Snag

March 28, 2023

The battle over ESG in the United States is complex. New fault lines appear almost weekly as the battle moves to the states.

On one side, left-leaning (“blue”) states are pushing pro-ESG legislation. For example, California reintroduced legislation in January that would require private and public companies to report scope 1, 2, and 3 emissions and set targets. If passed, it will be the most aggressive mandatory reporting scheme in the U.S., depending on the SEC’s proposed climate disclosure rules.

On the other, right-leaning (“red”) states, notably Florida and Texas, have passed anti-ESG legislation that bars state funds from being invested with investment managers and companies that use ESG. However, the effort may have its limits. Deep-red states like Wyoming, Kentucky, and North Dakota have seen pushback to anti-ESG measures.

We looked at three states to identify countervailing narratives. Who were the voices and what were the perspectives reflected in the debate? And what might this suggest for how to effectively communicate and engage on ESG?


The Wyoming House of Representatives Appropriations Committee in February unanimously voted down two anti-ESG bills out of fear they would severely restrict the ability to invest state funds.

Wyoming Retirement System’s Chief Investment Officer Sam Masoudi cited confusion around how the bills define ESG and their potential to limit investment in companies that follow ESG principles. “One of our major concerns is that ESG is defined so broadly and pretty subjectively…if a company has a statement about being supportive of diversity for instance that might be enough to get them on the do not invest list,” he said.


The board of the County Employees’ Retirement System (CERS) announced it would not comply with a new state law aimed at curtailing ESG.

Under Senate Bill 205, which passed in April of 2022, the state treasurer is required to publish a list of financial companies accused of boycotting energy enterprises. These companies are subject to divestment if they fail to cease their alleged boycott, according to the law.

CERS believes divesting from certain firms targeted by the law is “inconsistent with its fiduciary responsibilities with respect to the investment of CERS assets” according to a February 13 letter sent to the state’s treasurer.

North Dakota

On February 1, the North Dakota House of Representatives voted 90-3 to reject a bill that would create a list of financial institutions determined to boycott energy companies, similar to Kentucky’s Senate Bill 205.

Lise Kruse, the commissioner of the North Dakota Department of Financial Institutions, took issue with the bill’s ambiguity. She argued that “the treasurer simply needs to receive a complaint about the financial institution. Relying on a one-sided notification, without an appeal right or due process, allows for the possibility of wrongful determinations.”

Financial institutions such as the North Dakota Bankers Association and Independent Community Banks of North Dakota came out against the bill.

Following the defeat of the measure, Rick Clayburgh, chief executive of the North Dakota Bankers said the association’s “biggest concern is the idea of somebody telling our banks who to do business with or who not to do business with. We believe our banks should be allowed to do business with customers they know, the people they know and to make those decisions.”

Beyond these three examples, there are also red states like Kansas and Indiana that have expressed concern based on the costs of complying. For example, the Kansas Public Employees Retirement System predicts anti-ESG legislation could cause more than $1 billion in losses and “could negate 10 years of funding progress made by the state.”

Is There a Middle Ground?  

These examples suggest there are opportunities to rise above the political poles and focus on issues that resonate across party divides. Our takeaways are:

  • Know your Stakeholders: Financial regulators in North Dakota, for example, were vocal about due process. In Kentucky and Wyoming, criticism revolved around the bills’ limiting effect on investment. Start by understanding who your stakeholders are and what they care about most.
  • Focus on Competition and Choice: Many argue that anti-ESG investing policies are also anti-competitive, restricting the state’s ability to act in a way that best serves stakeholders. Messaging that speaks to free markets, access to more and better information and informed choice is likely to have broad appeal.
  • Advocate for Responsible Action: Given the projected price tags associated with some of the legislative proposals, messaging that focuses on fiscal responsibility and value creation (across different investments) will build the case for responsible action.

Our Advice for Companies:

Due to the confusing and often polarized discussion about ESG, our advice to companies remains the same:

  1. Avoid using jargon, particularly “ESG jargon.” The term ESG is often misused or conflated to mean different things including investing, non-financial disclosures, corporate strategy, issue advocacy, purpose-driven communication, etc. Be intentional about how you define and use the term to avoid confusion and false narratives.
  2. Communicate the “why.” Focus on the direct risks and opportunities for your company and ensure messaging links to the business case, which includes employee and customer interests. Our APCO research shows support for advocacy if it connects to the business.
  3. Know your audience and remain authentic to your brand. Employees, investors, and customers all have different expectations. Stay focused on issues that are business-relevant or important to your employees and customers. Our research on corporate advocacy last year remains a good resource to understand public sentiment.

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