Report: Anti-ESG legislation slowed in 2024, but it’s still having a ‘chilling effect’

Legislation opposing ESG initiatives once again dominated state legislative agendas in the 2024 sessions, but increased opposition from everyone from investors to business leaders managed to squash most of those efforts, a new report from policy research and advisory firm Pleiades Strategy has found.



ESG (environment, social and governance) is essentially a tool for consumers and investors to have better information about how a company responds to issues like climate change, its impact on the environment and surrounding communities, and how it governs itself. This year, 161 bills in 28 states sought to prohibit companies from using ESG investment criteria when evaluating risk.



Just six passed, according to Pleiades, compared to 23 in the 2023 legislative year. (Many states have wrapped up their legislative sessions for 2024 at this point.) Those that did pass, the group said, were weakened.



However, the left-leaning policy group, warned, efforts to pass these bills have led to companies walking back commitments on sustainability, racial equity, and other issues “due to the threats of fines, civil litigation, and political harassment.”



That comes despite the fact that many of the anti-ESG laws from the past two years were watered down before they passed with so-called “escape clauses” that give companies a way to avoid compliance with anti-ESG legislation if complying would have resulted in higher costs or lower returns.  That let backers of the bill claim a political victory in its passage, Pleiades said, but reduced the threat to businesses. The group warned, though, that the long-term picture is uncertain, as the fate of future legal challenges is still uncertain.



“The full effect of these messaging wins and the legal uncertainty brought by even weak bills with robust escape clauses is not easily measurable, but it is clear that these state policies are having a chilling effect on corporate dialogue on key issues, such as climate change and diversity, equity, and inclusion,” the report read. “Despite the relative lack of success of anti-ESG proposals in legislatures, an observable chilling effect has spread through the private sector.”



Texas was the first state to take legislative action against ESG, with a 2021 bill prohibiting municipalities from contracting with banks that have ESG policies. That resulted in major banks, including JPMorgan and Goldman Sachs, to back out of consideration. Research showed the Texas bill cost taxpayers between $300 million and $530 million in just six months due to higher fees. 



Two of the bills that did pass in 2024, in Georgia and South Carolina, focus on state-managed pensions. Florida and Tennessee, meanwhile, passed laws that limit financial institutions’ ability to evaluate certain types of risk. Pleiades claims the language in those is tailored to “preserve the funding of extremist groups … known to engage in bigotry and discrimination”. Louisiana and Idaho also passed anti-ESG laws, the group says.



To date, Pleiades says, no laws have passed in Alaska, Iowa, Maine, Minnesota, Mississippi, Missouri, Nebraska, South Dakota, and Wisconsin, all of which have considered multiple kinds of bills since 2021. And none of the six bills in Michigan, New York, or Pennsylvania have had a single committee hearing since being introduced in 2023.



“The anti-ESG campaign will not change the fundamentals that the climate is changing and the energy system is en route to a 100% clean energy future,” the group wrote. “Anti-ESG campaigns can mask these realities, and it is Pleiades’ expectation that antiESG legislative efforts will continue into 2025. But the real economic fundamentals at play cannot be ignored — climate risk is financial risk and there is immense economic opportunity in building solutions to this global challenge.”