ESG investing has been under attack, but advisors and brokers have mostly quashed the backlash

Despite a flurry of anti-ESG investing bills popping up in legislatures around the country the past two years, everyday investors and their financial advisors remain free to discuss and execute those sustainable strategies without interference, a new report from US SIF — the Sustainable Investment Forum has found.

“There have been many anti-ESG bills making headlines both in Congress and in states across the country. Yet, most of the bills are focused on the investment of state and federal funds and do not affect financial advisors or broker-dealers,” the report, State-Level Anti-ESG Efforts Affecting Financial Advisors, said.

Since 2021, there have been 366 anti-ESG bills introduced in state houses around the United States. Of those bills, the majority have to do with the investment of state funds and public pensions.

Only 7 out of the 366 introduced anti-ESG  bills, or about 1.9% of the bills, impact financial advisors and broker- dealers. None of the proposed state laws impacting financial advisors and broker-dealers have been passed into law.

The report discussed two of the most successful anti-ESG efforts.

In Missouri, two bills were introduced to the State House in 2023, both of which died in that chamber, and one was introduced to the State House in 2024 but has yet to gain any traction, the report noted.

With the bills not moving in the legislature, the Secretary of State in Missouri used the state Administrative Procedures Act to pass a rule that requires financial advisors and broker-dealers to disclose to their clients and get specific consent if they incorporate a “social objective” into their discretionary investment decisions. The Missouri regulation has been in effect since July 30, 2023.

In Wyoming, the Secretary of State issued a similar rule that went into effect on Dec. 14. In February 2024, Wyoming Governor Mark Gordon used his line-item veto power to strip out certain parts of the state’s anti-ESG disclosure rules for financial advisors and broker-dealers, including removing the section requiring specific consent from clients to consider ESG factors.

“For now, these appear to be isolated incidents and we have not seen a widespread proliferation of anti-ESG laws impacting financial advisors and broker-dealers that require that they receive specific consent from their clients for the consideration of these factors,” US SIF wrote.

A second report from the group, Sustainable Investing Policy Landscape Mid-Year Review 2024, also gave sustainable investors reason for optimism.

“Looking across the policy landscape on sustainable investing, the overall trend suggests that there is a decrease in the appetite of politicians to target this industry from previous years, but the consequences of the lawsuits and legislative measures that have already been put in place will continue to play out over the coming months.” the conclusions in that report said.

The US SIF policy team said it will continue to keep members informed of developments as they occur and will monitor the 2024 U.S. election for its impact on the field of sustainable investing.

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