With help from outside influence groups, Idaho lawmakers work to ban climate action

(Idaho Statesman) — Lawmakers in Idaho are once again blocking efforts to consider environmental damage in investment decisions, with the help of outside lobbying groups that have links to the oil industry.

Idaho is one of several conservative states with bills this year aimed at prohibiting investment practices that use ESG, or “environmental, social and governance” factors. The practice has grown in popularity as more consumers have demanded investment funds that align with their personal values or consider financial damages caused by climate change.

Those Idaho bills this year were significantly influenced by national conservative organizations like the Heritage Foundation, the Foundation for Government Accountability and the Alliance Defending Freedom, lawmakers and lobbyists told the Idaho Statesman. The groups have sizable bank accounts that have been funded in part by conservative donor networks with ties to oil interests.

Doug Taylor, a lobbyist for Opportunity Solutions Project, the political arm of the Foundation for Government Accountability, told the Statesman FGA drafted House Bill 669, a bill to ban large banks from using ESG factors. FGA is a tax-exempt charitable organization headquartered in Naples, Florida, that has gained influence in conservative legislatures around the country. The bill would prohibit state agencies and local governments in Idaho from contracting with companies that boycott oil and mining companies or gun manufacturers.

“As long as legislators are asking for help and support … we’ll be there to help them,” Taylor said.

Rep. Josh Tanner, R-Eagle, who sponsored the bill, told the Statesman he worked with FGA and the Alliance Defending Freedom, an organization that advocates for conservative Christian legal policy.

House Bill 669 was one of two bills floated by Idaho lawmakers targeting ESG this year. Another bill that became law, Senate Bill 1291, bans companies that do business with the state from boycotting energy industries, including fossil fuels, and the firearm industry.

The bill, sponsored by Sen. Doug Ricks, R-Rexburg, prominently resembles model legislation from the Heritage Foundation, a conservative think tank whose donors included the Koch brothers. The foundation has long funded climate denialism and authored a blueprint for rolling back environmental regulation if former President Donald Trump wins a second term.

The bill also included elements of model legislation from the FGA obtained by the left-learning group Documented. FGA also received seed funding from a Koch-supported donor network called the State Policy Network, Vox reported.

The Heritage Foundation and FGA did not respond to questions about their lobbying efforts or donors. Ricks told the Statesman that lawmakers are trying to protect important industries and “prevent outside influences, big corporations from outside Idaho from telling us what is important in our state.”

Idaho official opposes ‘environmental ideology’

This year’s legislation is lawmakers’ second swing at countering ESG efforts, after legislators last year banned entities from including ESG factors in state procurement bids and prevented banks that hold state funds from conducting ESG activities.

There have been trillions of dollars invested in ESG repositories, and major financial managers like Vanguard and BlackRock have had various ESG funds for consumers to stow their money in. The growth of ESG resulted in a political backlash from conservatives, who have dubbed the practice “woke” and aimed to ban it. That stance appears to have had some effect. Investors pulled $13 billion from ESG funds last year, according to Morningstar, though the funds still have trillions of dollars invested.

“We don’t want these institutions to force their ideological beliefs down on the people,” Tanner told the Statesman.

The fight has reached the halls of Congress, where last year President Joe Biden used his first veto in office to counter a Republican-led effort to outlaw pension fund managers from considering factors like climate change.

“Some of the largest banks and corporations out there are seeing how much climate change can negatively impact their long-term businesses,” Ryan McGoldrick, a lobbyist for environmental group Conservation Voters for Idaho, told the Statesman. “They would like to avoid something that’s causing huge economic issues around the world.”

The ESG fight has also brought together Idaho’s statewide Republican officials and federal delegation, who have pushed to limit national efforts to introduce ESG metrics. Raul Labrador joined other Republican attorneys general last year in asking large investors to pull out of a climate investment fund hoping to limit the effects of climate-warming emissions. In February, investors pulled trillions from the fund.

“They have a clear fiduciary obligation to their investors to maximize their returns, not prioritize environmental ideology,” Labrador said in a statement at the time.

He also joined a Kentucky lawsuit to combat federal requirements that states cut tail-pipe emissions, calling the reduction targets “ridiculous.”

Treasurer Julie Ellsworth told the Statesman she has been working with Idaho bankers, credit unions and extraction industry groups in recent years to work on anti-ESG legislation. In 2022 she and other state leaders penned a letter opposing efforts by Standard & Poor’s, the credit rating agency, to adopt ESG criteria in state credit ratings. She also opposed an effort by the SEC to allow “natural asset companies,” which would be entities that protect natural spaces, to register on the New York Stock Exchange. The SEC withdrew the proposed rule in January, and Republicans in Congress are attempting to ban the SEC from ever doing so in the future.

Ellsworth said she believes that efforts from companies to target ESG are skirting the policy process, and that if they want to force those policies “upon the American people,” they should take that legislation through the “front door” of Congress. Policymakers should be the ones crafting that legislation, she added.

“Come in through the front door if you wish to have a policy that will impact my Idahoans,” she said.

Outside groups involved in writing legislation

FGA, which was credited with crafting the House bill, has had steadily climbing donation revenues since its founding in 2011. The organization has raised close to $70 million in revenue since then, including $44 million from six foundations tied to billionaires, according to a CNN investigation. One of those foundations was Donors Trust, which has received donations from the oil billionaire Koch brothers.

Taylor said the group was also involved in a failed bill this year that would have likely ended Medicaid expansion as well as one to impose stricter requirements on Idahoans receiving unemployment benefits. Gov. Brad Little signed that bill into law in March.

The organization also fought to weaken child labor laws and limit eligibility for food stamps, and boasted of more than 70 “election integrity policy wins” in 19 states in 2022. FGA opposes ranked-choice voting, according to its annual report, and helped craft a 2022 Missouri law imposing strict new voter ID requirements.

Meanwhile, ADF, another organization involved in the ESG proposals, was retained by Labrador as counsel for pending U.S. Supreme Court cases on abortion and gender-affirming care for transgender minors.

Matt Sharp, senior counsel with the ADF, told the Statesman that his organization believes banks and credit card companies have prevented a free market for consumers who lose an account for ideological or religious reasons. Sharp compared “de-banking” to redlining, a midcentury practice of excluding Black Americans from federally insured mortgages.

“This is sort of a modern day version of that, of political and religious redlining,” he said.

Funders of the ADF have faced pressure to cut their support as the organization’s income reached $104 million in 2022. In a February article, ADF’s CEO wrote that many banks have developed “hate speech” policies. The Southern Poverty Law Center, a progressive legal advocacy group, designated ADF as a hate group in 2016 for its opposition to LGBTQ+ rights. The ADF in a news release said it was targeted for surveillance by banks after the federal government labeled it a “hate” group.

Sharp declined to provide details on his organization’s funders, and declined to say whether any of its donors could potentially profit from laws prohibiting ESG and other “social credit scores.”

Nonprofit organizations do not have to disclose their donors, but ADF’s funders include conservative big donors like the founder of Hobby Lobby and the DeVos and Prince families, according to the New Yorker. The Charles Koch Institute gave $275,000 in 2020, according to a tax filing.

For the Senate bill, Ricks said multiple groups have been working on the language for several years. He said he expects industries to consider environmental issues, but that if governments “pull the rug out” from the oil industry, it would have “catastrophic effects” on the global food system. The Idaho Farm Bureau and the National Rifle Association supported the bill.

“We believe these industries are important. We believe we should support companies that do this,” Ricks told a legislative committee.

House Bill 669 would ban the largest banks and credit card companies from financial “discrimination” against any person or entity on the basis of “social credit scores” that consider their views on religion, climate targets or gun regulation. The bill would only apply to banks with more than $100 billion in assets and to payment processing companies that handle over $100 billion annually. The Idaho Association of Commerce and Industry opposed the bill, spokesperson Jessica Anderson said.

The Idaho attorney general would have authority to investigate and enforce the law and to allow private lawsuits. The Senate still needs to approve the bill after it passed in the House.

“This is a situation where the government is trying to step in and regulate a business conducting business, and we’re generally opposed to that level of overreach,” Anderson told the Statesman, adding that she thinks banks should be allowed to consider whatever considerations they deem relevant.

Potential harms of anti-ESG legislation

Research also indicated the investment restrictions imposed by conservative states can cost taxpayers hundreds of millions.

An anti-ESG law that Texas passed in 2021 prompted five of the largest bond underwriters nationwide to stop doing business in the state, according to a nonpartisan report from the Brookings Institute. The report estimated that the changes would reduce competition and force governments that use bonds in the state to pay $300 million to $500 million more in interest in the first eight months after the law went into effect. Ricks told the Statesman he thinks the Brookings projections were “completely incorrect.”

Another report released this month from the Texas Association of Business — which includes oil companies as members — found the anti-ESG laws have cost nearly $670 million in lost economic activity.

Ricks told a Senate committee that a provision in Senate Bill 1291, which bans contracts with companies boycotting energy sectors, gives public entities “an out” if only ESG companies are available for a particular need. The bill applies to contracts with companies that have 10 or more employees and are worth more than $100,000.

Ellsworth said Texas’s ESG law did not include the exceptions that Idaho’s laws have. The law that prohibited state-contracted banks from setting ESG standards, which went into effect last year, has not reduced the number of companies that wish to bank for the state, she said.

Idaho is one of 24 state legislatures considering ESG legislation, and there are over 118 related bills around the country, according to an analysis by Pleaides Strategy, an energy and economy-focused research and advisory firm.

McGoldrick, of Conservation Voters for Idaho, said it would be better if legislation were drafted by entities inside the state to solve problems. While these organizations and lawmakers claim they want to avoid meddling in free markets, they’re pushing legislation to do just that, he added.

“It’s outside interest groups and outside large money funders trying to influence what’s happening in Idaho,” he said.