Idaho Republican legislators and state officials are preparing bills for the upcoming 2023 legislative session that would be designed to further restrict using environmental, social and governance standards in public funding or investments.
The Idaho Legislature’s Joint Interim Committee on Federalism discussed legislation to limit or block environmental, social and governance, or ESG, standards during a meeting Monday at the Idaho State Capitol in Boise. The meeting was likely the final legislative meeting before a new crop of 39 first-time legislators are sworn in next week during the organizational session for the 2023 legislative session.
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During Monday’s Committee on Federalism meeting, Rep. Baraba Ehardt, R-Idaho Falls, described meeting with U.S. Sen. Mike Crapo, R-Idaho, Idaho State Treasurer Julie Ellsworth, state Rep. Sage Dixon, R-Ponderay, and state Sens. C. Scott Grow, R-Eagle, and Doug Ricks, R-Rexburg, while drafting a bill.
Ehardt also said she has traveled to conferences to work on the bill. Members of the Committee on Federalism had previously met with the director of the Free Enterprise Project and a chief economist with the American Legislative Exchange Council about ESG in June. The American Legislative Exchange Council is a national membership group of legislators from different states dedicated to the principles of limited government, free markets and federalism, according to its website. The American Legislative Exchange Council has become known for its success in sharing model legislation that can easily be cut and pasted and shared between different states.
Ehardt said the focus of the bill is primarily contracts and access to financial services.
“ESG is truly antithetical to our American way of life and to our constitution,” Ehardt said. “ESG is not free-market.”
Ellsworth told the Committee on Federalism that Ehardt shared draft legislation with her shortly after the 2022 legislative session ended. Ellsworth then took the draft to the Idaho Attorney General’s Office to align it with state laws on banking and investments.
Ehardt and Ellsworth said they are not looking to stop private businesses from investing the way they want to.
“Any legislation that I am working on deals with public monies,” Ellsworth told the committee. “This is an important concept and a very important distinction. This is not about the private sector. It’s about public monies. If you are going to be a credit union or bank that is seeking to do business with the state of Idaho … you cannot override for ESG purposes and boycott legal operating businesses in our state and still qualify as a depository for the state of Idaho.”
Ehardt and Ellsworth said their legislation is not yet in final draft form, and they did not share copies of their bill.
In June, the president of the Idaho Association of Commerce and Industry business lobby said in an interview with the Idaho Capital Sun that ESG standards are not new but they are becoming a political “boogeyman” used to drive division.
There was no public testimony taken during Monday’s meeting.
Why is the Idaho Legislature trying to limit environmental and social standards ratings?
In March 2021, the U.S. The Securities and Exchange Commission announced that it was launching a new task force to focus on climate change and ESG issues.
“Climate risks and sustainability are critical issues for the investing public and our capital markets,” said then-acting U.S. Securities and Exchange Commission chair Allison Herren Lee said in a written statement at the time.
In May of this year, Gov. Brad Little, the state’s congressional delegation, other Republican state officials and members of legislative leadership sent a letter to Standard & Poor’s credit rating agency opposing using ESG ratings for states.
Idaho legislators have already passed on bill on ESG
This is not the first time Republican legislators have attempted to push back against ESG. During the 2022 legislative session, Republicans passed Senate Bill 1405 along party lines, with all Republicans voting in favor of it and all Democrats opposing it. The law says “no public entity engaged in investment activities shall consider environmental, social or governance characteristics in a manner that could override the prudent investor rule.” The law also defines “disfavored investments” as investments or investment limitations that are against the public policy of the state.
The Legislature’s organizational session runs Dec. 1 and, if necessary, Dec. 2 at the Idaho State Capitol in Boise. The 2023 legislative session officially begins Jan. 9, with Gov. Brad Little’s State of the State address highlighting the first day of the new session.