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Legislative Update 12-12-22

Dec 12, 2022

Just as the trend toward ESG (environmental, social and governance)-influenced investing is making inroads with both private and public fund managers, many states including Ohio are proposing legislation that would prohibit those types of investment strategies from taking hold.

Two Ohio bills — one in the House and one in the Senate — touch upon the backlash trend of anti-ESG investing legislation popping up in Republican-dominated statehouses around the country.

The proposed laws each deal with a specific means of thwarting the targeting of more environmentally or socially conscious investment strategies that can take the form of avoiding investments in industries like firearms companies, fossil fuel producers and mining, forestry and other environmental companies seen to engage in unsustainable practices.

Ohio House Bill 297, introduced more than a year ago and which has received only one hearing in the chamber's Government Oversight Committee, would prohibit the state or local governments from contracting with companies with "discriminatory practices or policies regarding the Second Amendment."

Dubbed the Firearm Industry Non-Discrimination Act, the bill sponsored by Rep. Scott Wiggam (R-Wooster) takes the form of a "boycott bill" that restricts one type of ESG activity.

In this case, the bill explicitly prohibits government agencies from doing business with companies unless there is "written verification that the company does not discriminate against firearm trade entities or firearm trade associations," according to the three-page bill's language.

Ohio's Senate Bill 367 attacks attempts at ESG investing using a slightly different approach.

The partisan bill, which has four Republican sponsors, including Kirk Schuring of Canton and Jerry Cirino of Lake County, was introduced in mid-November, just a month and a half from the 134th General Assembly's two-year legislative deadline. It was assigned to the Senate Finance Committee on Nov. 30.

The proposed legislation adds language to an existing statute and specifically prohibits investment strategies based on social considerations, outlining that retirement and investment boards can consider no strategy other than maximizing investment returns.

The bill's language directs board members of the Ohio Public Employees Retirement System; the Ohio Police & Fire Pension Fund; the State Teachers Retirement System; the Ohio Highway Patrol Retirement System; trustees of a state college or university; and the Ohio Bureau of Workers' Compensation not to "make an investment decision with the primary purpose of influencing any social or environmental policy or attempting to influence the governance of any corporation."

The language, peppered throughout the bill, also clarifies that the boards "shall not adopt a policy, or take any action to promote a policy, under which the board makes investment decisions with the primary purpose of influencing any social or environmental policy."

Neither bill is in the position for immediate passage; the House bill has only had one reading and the Senate bill is not on the committee schedule yet. However, as the General Assembly comes to an end this December, there is always to chance the language is attached to a "Christmas tree bill" that contains a host of unrelated amendments for quick passage.

 

Greg Bennett, Partner                                     

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