Policies
Over the last several years, more than 370 bills have been introduced at the state level that would restrict investors and companies from considering all material financial risks in decision-making. The proposals range from policies banning state pension funds from considering climate financial risk in investment decisions to prohibiting state contracts with companies who have so-called “boycotted” fossil fuel companies. Only a small percentage of bills have made it into law -- roughly 30 bills and resolutions have passed since 2022. In 2024, of 161 bills introduced or carried over from 2023, only 6 were signed into law.
Legislative efforts continue to fall flat in part due to the private and public sector pushback amid concerns over the economic impacts such policies would result in and the growing wariness over the government interfering with businesses’ freedom to invest and operate responsibly.
The economic impacts could include:
Forced divestment and decreased returns for retirement beneficiaries
Higher interest rates on state and municipal debt offerings
Increased government borrowing costs due to financial industry restrictions
Increased costs to manage state assets
Increased costs in reporting and tracking requirements on proxy voting for public pensions leading to increased administrative costs
On the flip side, some legislatures, Illinois and Oregon, have passed policies to protect businesses' right to consider climate risks and other material factors. California passed a first-in-the-nation state disclosure law that gives investors, consumers, employees, and other stakeholders more insight into companies’ efforts to manage climate-related financial risks. The U.S. Securities and Exchange Commission adopted a landmark federal disclosure rule, responding to investors and consumers alike who have been making the case for improved transparency for decades.
At the federal level, congressional lawmakers have begun introducing bills to restrict responsible action on climate financial risks, including one House proposal that would impact the longstanding shareholder proposal process that investors have used to engage companies and the U.S. Security and Exchange Commission’s role in that process. Other bills would change how asset managers assess financial risk in pension plans. None of these bills have yet to advance to the Senate.
Freedom to Invest expects state and federal legislative efforts to undermine investment and business freedom to continue over the next few years – including legislation to restrict specific sectors, including insurance, utilities, and banking, from factoring climate financial risk.
WHAT TO WATCH:
Restrictions on fiduciaries of state funds to take actions that further political, social, or ideological interests.
Bans on fiduciaries of state funds and private sector pension funds and their subdivisions from considering climate financial risk.
Prohibiting states from contracting with certain companies that boycott energy, mining, and agriculture production.
Reforms to the shareholder proposal process on how investors engage companies they own and the role of the U.S. Securities and Exchange Commission.
Join Freedom to Invest in pushing back against these harmful bills. Learn how you can get involved here.
