HB 190: Powering up the Idaho State Treasurer — 2023

Rep. Barbara Ehardt (R-Idaho Falls) and Idaho State Treasurer Julie Ellsworth introduced House Bill 190 as part of a concerted attack on Environmental, Social, and Governance (ESG) investing, which financial managers and investors use to measure and mitigate material risks.

First, what is ESG? It’s a filter of risk management considerations focused on climate-related risks, social and community impacts, diversity of leadership, exposure to regulatory risk, and hundreds of other factors related to “material risk.” Several large firms (MCSI, Sustainalytics and S&P) measure and report on ESG metrics, which investors can use to manage investments. The Security and Exchange Commission (SEC) and others are finalizing rules around ESG reporting, some of which are already the target of litigation from Idaho Idaho Attorney General Raúl Labrador and 24 other states..

The bill would prohibit any banks or credit unions from serving as “State Depositories” if they prohibit investments in certain industries, such as mining, fossil fuels, timber, agriculture or nuclear or hydro power. The bill would significantly expand the oversight and enforcement powers of the State Treasurer, requiring her to review all publicly available statements and external communications from any financial institutions that serve as State Depositories to hold Idaho state dollars.

Currently, there are 9 banks so designated, headquartered in 8 different states.

The Treasurer would be required to review affidavits from these financial institutions on an ongoing basis, evaluating whether banks may be “boycotting” favored industries or instead, whether their financial decisions are based on “legitimate business purposes.”

The State Treasurer would then maintain a Naughty/Nice list (banks that “boycott” or use ESG get the boot) that is already the subject of intense controversy in other states that have implemented similar measures. In Kentucky the state Bankers Association sued the state’s Attorney General over implementation of this Naughty/Nice list, arguing in their filings that it’s created “an ongoing state surveillance system.”

The bill would supercharge the office of Idaho State Treasurer, requiring an increase in staff, office space, and funding in order to carry out these new duties.

And remember, the qualifications to be Idaho State Treasurer are minimal.

The Idaho Statesman argued that we should eliminate the Treasurer’s office in 2017,

 “The elected office of state treasurer is a holdover from an earlier era when the amount of funds involved and the degree of managerial sophistication required were minimal. Because of that, when the office was established in the Idaho Constitution in 1890, the eligibility requirements were minimal. You must be at least 25 and a resident of Idaho for two years. Once you take office, you need to reside in the state and must maintain an office in Boise. That’s it. No educational requirement, such as a degree in accounting or finance, and no need for previous financial management experience.”

Along with House Bills 189 and 191, this bill would place unnecessary burdens on the private sector and restrict banks from considering all relevant risks and opportunities when making decisions in order to fulfill their fiduciary duties. They would also fly in the face of the Prudent Investor Act, which requires public entities to make decisions in the interest of beneficiaries, i.e. the public. It’s fine for someone to limit investments with their own money, but it’s not ok to do so with public dollars. Pulling state dollars out of risk-informed investments is imprudent by its very definition. 

As a result the bill would lead to increased turbulence, uncertainty, and litigation, along with significant costs to taxpayers.