HB 191: Blocking ESG in state contracts — 2023

House Bill 191 was introduced by Rep. Jason Monks (R-Nampa) and Senate Majority Leader Sen. Kelly Anthon (R-Burley). The bill seeks to prohibit the award or rejection of any state contracts on the basis Environmental, Social, or Governance standards, as well as on the basis of any “subjective ethical” criteria.

First, what is ESG? It’s a set 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, that 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 could have significant consequences for all public contracts valued at more than $100,000. Everything from IT contracts to road and school construction, and everything in between. Pursuant to the law, any contracts that apply ESG criteria in the selection or rejection of a bid would be rejected, even if the proposed bid was from a contractor that “maximize[d] the value” as is required by the Uniform Prudent Investor Act.

The bill also raises questions about whether the state may be required to contract with convicted felons, after all, that’s a “subjective ethical” consideration, is it not?

The bottom line is that Idaho’s procurement laws already require best value contracting, and this bill would undermine and conflict with that direction.