CHEYENNE—The House Freedom Caucus’ proposed ban on “environmental, social and governance” investing threatens Wyoming’s pensions and stock market returns, the state’s investment chiefs say.
Those warnings sparked a flurry of changes by the legislation’s sponsor, Gillette Republican Christopher Knapp, as he scrambled to achieve the caucus’ ideological goals without tanking the state’s returns.
Money managers on Friday had excoriated the bill, telling lawmakers on the House Minerals, Business and Economic Development Committee that their plan to penalize investors who pick companies with ESG policies could make Wyoming’s investment pools toxic to talented financiers. The bill empowers the Wyoming Attorney General to sue any investor who makes such investments with state money for damages worth triple their fees.
“You can probably say the better half of my staff are all going to walk out the door,” if the legislation passes, State Treasurer Curt Meier, a conservative Republican, told the House Minerals Committee on Friday. “Every one of our managers are going to say that there is a material change in our contracts and they’re going to walk out the door. And we’re going to be left with nobody to invest and no markets to invest in.”
Knapp worked with Meier on an extensive amendment, and the House Minerals Committee advanced House Bill 80, “Stop ESG-State funds fiduciary duty act,” Monday with only one no vote. It wasn’t immediately clear whether the amendment addressed all of Meier’s concerns, as the treasurer was not present Monday and did not respond to WyoFile requests for comment.
Prioritizing speed
Freedom Caucus members on the panel pushed the vote through despite calls from their Republican colleagues to slow down and take more public testimony on a subject of considerable financial impact.
Meier’s office manages more than $30 billion in public money. His office did not provide an estimate of potential losses to those funds.
But the Wyoming Retirement System, which manages more than $8 billion in pension funds for state and local government employees, estimated losses of $1.1 billion in future revenue over the next three years if the bill as originally introduced became law.
That could hit the state’s pensioners, a lobbyist for the Wyoming Coalition for a Healthy Retirement, which represents firefighters, teachers, cops and other public employees, said. “Do we want investments to make a house payment or do we want them to make a political statement?” the lobbyist, Ron Sniffin, said.
Gillette Republican Knapp, a prominent Freedom Caucus member, brought the bill to combat what far-right Republicans describe as an insidious effort by big investment funds to block capital from fossil fuel production.
Amid the energy industry’s volatility, Wyoming has grown increasingly reliant on investment returns from the massive trust funds built up through decades of mineral royalties. But Knapp and the Freedom Caucus don’t want to see that money invested into funds or companies that might then work against the coal, oil and gas industries.
A chief villain for the bill’s proponents is BlackRock Inc., the world’s largest asset firm with trillions of dollars under its management. Wyoming is one of 11 states, led by Texas, that sued BlackRock and two other firms over their ESG approaches in November. The lawsuit claims BlackRock sought to manipulate the energy industry, specifically coal, into a more climate-friendly direction through its investments.
Bill changes
Knapp’s amendment removed language stating the state’s investments couldn’t go toward companies that promote goals like lowering carbon emissions, promoting abortion access or blocking firearms sales.
Under that wording, the state’s money managers worried the bill would outlaw investments in any company with a marketing statement about social values. Even Peabody Energy, a Fortune 500 company and leading coal mine owner, maintains a statement that it has a responsibility to address climate change. So do 493 of the other Fortune 500 companies, Wyoming’s Chief Investment Officer Patrick Fleming told lawmakers Friday.
Friday’s hearing was “unfortunate,” Knapp told WyoFile. “It really scared a lot of people … that this bill is going to somehow make it to where we couldn’t invest in anything, and that’s the furthest thing from the truth.”
The new version of the bill still mandates that the state’s money managers don’t invest in funds directed toward “the furtherance of environmental, social, governance, political or ideological interests.” But Knapp believes it eliminates the concern of Fleming, Meier and other opponents. To what extent they agree with him remained unclear. Fleming also did not respond to a request for comment Monday.
The House Minerals Committee advanced his amended version of the bill to the floor over objections from two Republican committee members who do not belong to the Freedom Caucus — Reps. Martha Lawley and J.T. Larson, of Worland and Rock Springs, respectively. Those lawmakers wanted the committee to slow down and give a very concerned group of agency representatives and lobbyists who opposed the bill on Friday a chance to speak on the amended bill.
“For transparency purposes, for the public, I’d like to see what their thoughts are on this,” Larson said.
He and Lawley were overruled by the committee’s Freedom Caucus members.
The caucus has made the bill part of its “five and dime” plan that its leadership intends to pass out of the House in 10 days. On Friday, a post to the caucus’ website stated “our bill to prohibit tax dollars from being invested into communist, anti-fossil fuel ‘ESG’ funds sits with the Minerals Committee, and will likely pass to the House floor on Monday.”
And so it was, with an 8-1 vote. (Lawley backed the bill though her effort to seek more public comment failed.)
The director of the state’s retirement investments said the amendment marked a major improvement but that the bill could still drive away talented managers of big hedge funds and other investment firms who aren’t desperate for Wyoming’s money.
The amendment “attempts to make the bill more neutral and that is a very good intent,” Wyoming Retirement System Executive Director David Swindell told WyoFile.
The state’s investments should be neither in favor nor in support of environmental, social and governance investing, but “ESG-agnostic” Swindell said. Knapp “removed some language that was probably too anti-ESG, it was not agnostic and too restrictive,” Swindell said.
Another critical change still needs to be made to the bill Swindell said. A penalty for investors remains, which Swindell hopes lawmakers knock out of the bill as the Legislature continues.
Knapp, for now, is backing that penalty. If one day someone discovered a firm managing Wyoming’s money has made investments in a fund that is pursuing environmental, social and governance goals, he wants the attorney general to be able to recoup some money, he said.
