Anti-ESG laws challenge fiduciary obligations, add significant reporting burden: PRI

Partner and chair of Herrick's Corporate Department, Morris DeFeo, was quoted in ESG Dive in an article discussing the impact of anti-ESG legislative efforts and the potential to affect capital available for businesses and investment vehicles that have a sustainability or social focus.

The article discusses a new study on the impact of anti-ESG laws on financial institutions’ business operations from Principles for Responsible Investment, which found that such efforts could have “significant unintended consequences, fail to achieve their goals, or both.” The study reviewed the impact of anti-ESG laws on business operations and the extent to which the laws may meet the stated aims of their proponents. The article noted how anti-ESG laws generate large volumes of additional due diligence and financial justification of regular investment activities, resulting in "increased workloads for legal, marketing, investment, stewardship and other internal teams." 

Morris discussed the impact of anti-ESG legislative efforts, noting that it “will be somewhat different depending on the nature of the legislation and of course the political climate from which they emanate." Further, “[t]hese efforts could materially affect the availability of investment capital for businesses and investment vehicles that have an ESG-based focus because certain funding such as state pension accounts may be prohibited from investing in ESG-based funds or companies.”

Read the full article in ESG Dive here. Access may require a subscription.