Kansas lawmakers are struggling to thwart state ESG investments

Republican lawmakers, who are pushing to prevent Kansas from investing its funds in a socially and environmentally responsible manner, are at odds on also imposing rules on investment managers when handling private funds, complicating their efforts to thwart what see them as “awakened” investments.

Committees in the Kansas House and Senate approved competing versions of anti-ESG legislation this week, and the two houses could debate it as early as next week. ESG stands for environmental, social and governance, and these considerations have become increasingly important when investing in recent years, sparking a nationwide backlash from conservative Republicans.

The Kansas Senate’s version of the anti-ESG measure would require private wealth managers to obtain written consent from their clients before investing their funds according to ESG principles. The House of Representatives bill contains no such provision.

WHAT ESG INVESTING IS AND WHY SOME POLITICIANS ARE IT

The issue of requiring private fund managers to disclose their ESG activities to clients, or obtaining verbal or written consent from clients for their use, appears to be the last major sticking point among Republicans in the GOP-controlled legislature. They have already withdrawn the toughest version of anti-ESG legislation in the face of opposition from powerful business groups, and have rewritten both bills to prevent a projected $3.6 billion in investment losses over 10 years for the Kansas Teachers and Government Employees Pension Fund.

A desire to thwart ESG investing is leading some Republicans to break with the party’s longstanding aversion to tougher business regulations.

“We have labels on our groceries,” said Rep. Michael Murphy, a Republican from rural south-central Kansas who has supported the toughest anti-ESG legislation. “We could look at it and say, ‘Well, I don’t want that, and I’ll take care of this.’ It allows you to make that choice, and that’s all.”

Proponents of ESG principles argue that they are not interested in investment managers boycotting industries like oil exploration. Instead, they encourage a broader assessment of investment risks, such as whether concerns about climate change make green energy more attractive and fossil fuels less attractive. They also argue that Republicans have made ESG a culture war issue in order to upset the GOP’s conservative base.

In Kansas, Democrats argue that anti-ESG legislation is unnecessary because state laws already require their managers to work to maximize investment returns. They also fear that even if the final legislation focuses on investing state funds, its provisions will be broad enough to handcuff cities and counties when they want, for example, to buy energy from green sources.

“That’s going to cause problems,” said Kansas City-area Assemblyman Rui Xu, the top Democrat on the House committee examining anti-ESG legislation.

SENATE KILLS BIDEN ESG INVESTMENT RULE IN STUNNING REMONISE

Utah’s Republican State Treasurer recently told a GOP convention that ESG is “an open door to authoritarianism” and is “Satan’s plan.” On Thursday, 19 GOP governors, including Ron DeSantis of Florida and Kristi Noem of South Dakota, issued a joint statement calling ESG a “direct threat to the American economy, individual economic freedom and the way we live.”

In Kansas, newly elected GOP Attorney General Kris Kobach and Republican State Treasurer Steven Johnson support anti-ESG measures, but they have argued that allowing state money to be invested along ESG principles threatens to erode the state’s investment returns. As a consumer protection measure, Kobach advocated an obligation for private asset managers to provide information.

But Rep. Nick Hoheisel, a Wichita Republican who chairs the House committee examining anti-ESG legislation, said his GOP members didn’t want to impose new mandates on private companies.

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“We already have enough mandates for companies,” Hoheisel said after the committee approved his bill. “In fact, we need to go back and start lifting some mandates for companies.”