States push costly GOP war on climate investing

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Jun 22, 2023 View in browser   By Arianna Skibell Presented by NRDC Texas Lt. Gov. Dan Patrick (R) has pressured the state Legislature to take steps against environmental, social and governance investing. | Eric Gay/AP Photo Republicans are gaining steam with their call to ban investment practices that consider issues like climate change, with 16 GOP-controlled state legislatures passing laws this year and more measures pending. But carrying out these laws is not cheap. Implementing systems of enforcement coupled with required divestments can cost taxpayers and public pensions billions of dollars, write Adam Aton and Avery Ellfeldt. That has led some lawmakers to amend or rescind their proposals on so-called environmental, social and governance investing. In Kansas, for example, lawmakers amended an anti-ESG law after the state budget office estimated it would cost Kansas’ retirement system $3.6 billion over a decade. “I hate to sound provocative,” Tim Graham of the Kansas National Education Association said during a hearing on the bill. “But when it comes to our pensions, keep your culture wars out of them.” A related measure in Texas cost taxpayers an estimated $303 million to $532 million over an eight-month period. Indiana lawmakers amended a similar bill after a state office concluded it would cost public retirees $6.7 billion in losses over 10 years. Model bills and bitter pills States weighing anti-ESG laws are largely drawing on a suite of bills written and popularized by national conservative think tanks, according to a report by Pleiades Strategy, an environmental group. But each state has a distinct approach, partly because lawmakers are nipping and tucking provisions as cost concerns grow. Experts say the resulting patchwork of laws is creating an increasingly difficult business environment. “As a financial services firm … you are pretty unlikely to satisfy all 50 states,” said Jennifer Schulp, who directs financial regulation studies at the Cato Institute, a libertarian think tank. “Over the long haul, I think [these laws are] a drag on the financial industry, as the costs of doing business are raised.” Plus, the state laws are sometimes in conflict with federal ones. The state laws say climate-related information is not material to financial performance and so should not be considered. But the Supreme Court has defined “materiality” as any information of interest to a “reasonable investor.” And investors are interested — meaning adhering to a state law could mean violating federal law and vice versa, said David Webber, a Boston University law professor who focuses on ESG investing. “That’s the liability trap,” he added.   It's Thursday — thank you for tuning in to POLITICO's Power Switch. I'm your host, Arianna Skibell. Power Switch is brought to you by the journalists behind E&E News and POLITICO Energy. Send your tips, comments, questions to askibell@eenews.net.   A message from NRDC: Strong EPA and DOT protections—like stronger vehicle pollution and efficiency standards and rules to cut power plant pollution—can help us reach our climate goals. Read how these safeguards can make President Biden’s climate commitments a reality.   Listen to today’s POLITICO Energy podcast Today in POLITICO Energy’s podcast: Kelsey Tamborrino breaks down the Biden administration's efforts to increase the amount of biofuels that oil refiners must blend into the nation’s fuel mix.   A message from NRDC:   Power Centers Metglas Inc. President Rob Reed observes the packaging process for amorphous metal shipped throughout the Western Hemisphere. | Photo courtesy of Mary Beth Smith/Metglas A tale of two types of steel The Energy Department is considering a rule that could force electrical equipment companies to use a certain type of steel called amorphous metal to build transformers, which are key for a functioning grid, writes Brian Dabbs. Advocates say amorphous metal is superior to traditional steel because it's more energy efficient. But only one company in the country makes it, and opponents argue that means the rule could lead to further supply chain delays. Colorado River cuts The largest Native American reservation in the United States has lost a key legal battle to protect access to a waterway that is critical to its citizens’ spiritual practices — and their survival, write Pamela King and Jennifer Yachnin. All but one member of the Supreme Court’s conservative majority ruled Thursday against the Navajo Nation in its fight to ensure that the federal government is legally obligated to address the tribe’s need for water from the dwindling flows of the Colorado River. Smuggler squeeze Hundreds of tankers could be barred from European ports as part of a new effort to crack down on illicit sales of Russian crude oil, which Western nations say are helping fund the war in Ukraine, writes Gabriel Gavin. After weeks of tense negotiations, European Union countries Wednesday signed off on the 11th package of sanctions to be imposed on Moscow in just over a year. The restrictions focus on tightening loopholes in existing rules. In Other News Drought: In Iran, some are chasing the last drops of water. Hands off: Three states just barred utilities from charging customers for their lobbying costs.   LISTEN TO POLITICO'S ENERGY PODCAST: Check out our daily five-minute brief on the latest energy and environmental politics and policy news. Don't miss out on the must-know stories, candid insights, and analysis from POLITICO's energy team. Listen today.     Subscriber Zone A showcase of some of our best subscriber content. Miami Mayor Francis Suarez speaks at the Conservative Political Action Conference on March 3 in Oxon Hill, Md. | Alex Brandon/AP Photo The Republican presidential primary now has a candidate who has arguably the most successful and aggressive climate record in GOP history. Analysts say the Mountain Valley pipeline will likely operate at an average of only 35 percent capacity once built, resulting in a "limited impact" on Appalachian gas production. New York state utility regulators Thursday began planning for a major new underwater transmission project to bring offshore wind energy into New York City. That's it for today, folks! Thanks for reading.   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president’s ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.       A message from NRDC: Fighting the climate crisis can’t wait—and transportation and power plants are two of our country’s largest sources of climate pollution. The EPA and DOT can implement new, critical standards for vehicles and power plants to protect our health and climate. Learn more about how these protections can help us clean up our air and reach our climate goals.     Follow us on Twitter Arianna Skibell @ariannaskibell   Follow us

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