SB 1405: Divestment from disfavored investments – 2022

Senate Bill 1405, introduced by Senator Steve Vick (R-Dalton Gardens), would prohibit the State of Idaho from considering environmental, social or governance characteristics (ESG) when making investment decisions.

The bill would require that State of Idaho investment boards (i.e. Endowment Fund Investment Board, PERSI and others) divest from “disfavored investments.” The bill defines disfavored investments as anything “against the public policy of the State of Idaho by statute, concurrent resolution, or executive order.” Who or how this is decided remains unclear. Further, every statute and resolution currently on the books would arguably have to be considered, dating back to the days of the Territorial Legislature.

What is ESG?

Environmental, Social and Governance (ESG) scores are a voluntary system for businesses to track and report on sustainability, transparency, and social responsibility. They provide a common framework for evaluating corporate governance and social impacts. They measure the impacts of companies and sometimes give a score for how responsible their business is, in an effort to prioritize social responsibility from corporations. Some businesses use ESG metrics to show their customers that they are making strides in sustainability, while some investors use them to guide investment decisions.

ESG reporting creates a way for companies to respond to customer demands – if shareholders want a company to become more environmentally sound, ESG scores can help track that progress. While this may sound like an easy and transparent way to show how companies are acting, not everyone is on board with ESG.

Some states, companies, and politicians oppose ESG because they fear that it represents a threat to their way of doing business.

Glenn Beck visited Idaho at the invitation of Rep. Barbara Ehardt (R- Idaho Falls) to present on ESG, which he describes as “CRT (Critical Race Theory) on steroids.” In Beck’s energetic presentation, he told the group that everyone will eventually have an ESG score and that scores will be used to track individuals and businesses, ruining business opportunities in the process.

These conspiratorial statements have turned ESG into a boogeyman in the legislature, with many legislators’ newsletters referencing ESG since.

We need to support reasonable policy decisions, and protect our state from being undermined by conspiracy theories. To do this, we must show state leaders that ESG investing is profitable and aligns with Idaho values, not something to be feared.