Alabama’s Senate is considering a new bill to boycott companies employing environmental, social, and governance rating criteria in their investment decisions.
The Alabama Senate Committee on Fiscal Responsibility and Economic Development approved Senate Bill 261 10-3 late last week, sending to the floor for general debate legislation aimed at curbing the use of ESG decisions by companies doing business with the state.
“If a company wants to do business here they can’t be in the process of boycotting an Alabama-based company because they believe in the Second Amendment,” committee member State Sen. Dan Roberts said during the vote. “We’re basically speaking as a state, that we want to not enable these laws to take place in Alabama that would greatly impact the businesses and the citizens.”
“We’re not limiting anybody’s rights with this bill,” Roberts also said when questioned by Democratic Sen. Vivian Figures about whether or not the proposal violated First Amendment rights for affected companies.
The Senate measure portends to protect industries like fossil fuel and mining by banning state contracts with companies deemed to be involved with a wide swath of ESG-related efforts, like the reduction of carbon emissions, provision of reproductive and sexual health services for employees, or the disclosure of investment information, when considering investments or business relationships.
In other words, companies would have to pass Alabama’s ideological litmus tests to gain state contracts.
The bill follows the template of bills introduced in other GOP-dominated states this year, with language largely copied and pasted from model legislation the right-wing Heritage Foundation posted on its website.
Republicans control Alabama’s House, Senate, and governorship.
In 2023, 13 states have or plan to introduce anti-ESG bills, some including “broader or more prescriptive measures” than current initiatives, said researchers from the the Harvard Business School Forum on Corporate Governance in an analysis of ESG battleground states published recently.
“These laws include a variety of different applications and carve-outs, and whether a company is in scope will depend on varied analysis in each state,” the report said. “Monitoring these measures and understanding the nature of conflicting requirements and associated risk will be essential.”
Researchers added that while the surge of anti-ESG measures posed “legal, operational, reputational, political and financial concerns,” some harsher proposals in state legislatures were being shot down “as a result of powerful opposition constituencies.”
That included two bills in Wyoming axed during debate and another in Indiana, where opposition from a state business organization forced a modification and reconsideration of proposed measures.
For business and civic organizations caught in the crossfire, like the Alabama League of Municipalities, a municipal government advocacy association that counts representatives from 450 cities and towns as members, “it’s just a wait and see on what the Senate and the House decided to do,” while local officials prepared to successfully pivot to any outcome, said Greg Cochran, ALM’s executive director.
Harvard researchers in their report also said “a small but significant” number of state legislatures have forward measures on the other end of the spectrum, seeking a liberal interpretation ESG criteria while pushing for stricter disclosure and adherence protocols. Most, however, appear to be “ESG-neutral.”
“We expect more states to propose or adopt anti- (and pro-) ESG state laws, particularly as the 2024 U.S. presidential election approaches and political agendas solidify, and as the global ESG regulatory framework, including a growing web of EU-related ESG measures, comes into greater focus,” the Harvard report said.