Alabama governor signs anti-ESG legislation

Gov. Kay Ivey made Alabama the latest GOP-dominated state to enact a law designed to limit the application of environmental, social, or governance factors by private sector businesses.

SB261, which took a little under a month to make it from committee proposal through the Republican-dominated state legislature to the governor’s desk, seeks to shield some of the state’s largest industries from increased scrutiny from would-be investors that might apply ESG-related criteria.

Largely following a script written by the Heritage Foundation, the law bars state and local government entities in Alabama from striking new contracts with businesses “that refuse to deal with” or “take any commercial action intended to penalize,” other companies involved in the fossil fuel, timber, mining, agriculture, and firearms industries in the state.

It’s a formula followed by many red state legislatures as they impose governmental limits on private-sector decision making in the name of arresting ESG.

The bill also bars state from doing business with firms said to “boycott” businesses that won’t commit to meeting several other social-related regulations, like executive board diversity criteria, or those failing to facilitate access to certain sexual health services, including abortions, sex or gender change surgery, or certain medications, treatments, and therapies.

The bill grants the state’s attorney general the power to enforce the regulations.

“Alabama citizens, in no way, shape or form, want ESG influencing business in our state, and this legislation most certainly sends that message,” Ivy said in a press release Tuesday.

Republicans dominate Alabama’s government and the bill cruised to approval with little debate in both the state’s House and Senate after being introduced to the floor by State Sen. Dan Roberts, a Republican.

During debates, Roberts said the bill would address “corporate boycott issues” linked to ESG rating criteria he alleged was being pushed by liberal lawmakers nationwide, claiming the practice amounts to mixing ideology and finances in a way he believed would “greatly impact” Alabama’s businesses.

All eight senate Democrats opposed the bills. Vivian Figure questioned throughout the legislative process if the banning of boycotts the bill proposed violated the First Amendment rights of the companies being targeted. During a committee hearing on the proposal, she also asked for evidence of the type of business prejudice proponents alleged was occurring in the state, a sentiment she reiterated during the vote.

“Still we’re trying to figure out where in our state these things are happening,” she said.

Seven other Republican states had anti-ESG law on the books as of March, a Harvard Business School study found, while another 13 have or planned to introduce bills this year.

Along with an uptick in anti-ESG initiatives coming from GOP-led states, the report also noted a corresponding increase in proposals from “liberal-leaning state governments that have embraced ESG-focused investing” as well as ESG-neutral legislation.

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