The Anti-ESG Movement: Will Wyoming Spark a Legislative Stampede in 2025?

On January 17, 2025, Wyoming lawmakers introduced House Bill 80, an anti-ESG bill designed to prevent the state from investing in companies perceived as hostile to its fossil fuel industries ¹. This move has ignited a debate about the role of ESG considerations in state investment strategies and raised questions about which states might follow Wyoming's lead. This article delves into the factors driving this trend in Wyoming, examines other states with similar economic profiles, and analyzes the potential for similar legislation to emerge in 2025.

Wyoming's Anti-ESG Bill: A Closer Look

House Bill 80 seeks to prohibit state funds from being invested in companies that boycott fossil fuel industries ¹. The bill's proponents argue that ESG considerations prioritize political and social agendas over financial returns, potentially harming Wyoming's economy, which heavily relies on oil and gas production ¹. However, the bill has faced strong opposition, including from State Treasurer Curt Meier, who warned of potential financial losses and staff resignations if it passes ¹. Interestingly, many energy companies, including those in the coal sector, already have ESG statements, adding another layer of complexity to the debate ¹. This suggests that the issue is not simply a binary opposition between fossil fuel industries and ESG proponents.

The debate surrounding the bill highlights a key concern: the potential conflict between fiduciary duty and broader social or political goals. While proponents of the bill argue that state investment managers should prioritize maximizing returns, opponents contend that ESG factors can be material to long-term financial performance and that ignoring them could expose the state to greater risk ¹.

Wyoming's Economic and Political Landscape

To understand the drivers behind Wyoming's anti-ESG bill, it's crucial to examine the state's economic and political context. Wyoming's economy is heavily reliant on the energy sector, with oil drilling and gas extraction, coal mining, and petroleum refining being the largest industries by revenue ². This dependence on fossil fuels makes the state particularly sensitive to any perceived threats to these industries. In 2024, Wyoming's gross domestic product (GDP) reached $40.2 billion, but the state has experienced slow population growth, ranking 39th out of all 50 U.S. states ². This slow growth underscores the challenges Wyoming faces in diversifying its economy beyond fossil fuels.

While the energy sector dominates, tourism and recreation also play a significant role in Wyoming's economy ³. The state's natural beauty and outdoor recreational opportunities attract millions of visitors annually, contributing to job creation and revenue generation. However, Wyoming faces challenges in balancing its reliance on energy production with the need to develop other sectors and attract a more diverse range of investors.

In terms of recent economic trends, Wyoming has experienced growth in sectors such as heavy and civil engineering construction, administration of economic programs, membership associations and organizations, and electrical equipment and appliance manufacturing ⁴. However, some industries, including those related to fossil fuels, have shown signs of decline. This dynamic highlights the need for Wyoming to adapt to changing economic conditions and explore new avenues for growth.

Wyoming's total personal income increased by 5.4 percent in the second quarter of 2024, matching the growth rate of the previous quarter ⁵. While this growth is positive, it was slightly below the U.S. average personal income growth of 5.9 percent during the same period. This indicates that Wyoming's economic performance, while not lagging significantly, is not keeping pace with the national average.

Furthermore, Wyoming's population change is influenced by both natural change (births minus deaths) and net migration (people moving in minus people moving out) ⁶. Understanding these demographic trends is crucial for assessing the state's long-term economic prospects and the potential impact of policies like House Bill 80.

Politically, Wyoming is a conservative state with a strong Republican majority in the legislature. This political leaning aligns with the broader anti-ESG movement, which has gained traction among Republicans who view ESG as a form of "woke capitalism" that undermines traditional economic values ⁷.

Investors in Wyoming

Wyoming's investor landscape is primarily focused on traditional energy investments, reflecting the state's economic dependence on fossil fuels ⁸. However, there are also efforts to attract a more diverse range of investors, including angel investors and venture capitalists, to support the development of other sectors ⁹. Organizations like the Wyoming Investor Group and the Jackson Hole Investor Group are working to connect investors with entrepreneurs and promote economic diversification ¹⁰.

Identifying Potential Followers: States with Similar Economic Profiles

Several states share economic similarities with Wyoming, particularly a reliance on fossil fuels and other natural resources. These states could be potential candidates for adopting similar anti-ESG legislation in 2025:

• Oklahoma: Oklahoma has a strong energy sector, with oil and gas extraction being a major contributor to its economy ¹². The state has already passed an anti-ESG law in 2022, indicating a political climate receptive to such measures ¹³.
• Alaska: Alaska's economy is heavily dependent on oil production, with oil and gas revenues supplying nearly 85% of the state budget ¹⁴. This reliance on fossil fuels could make Alaska susceptible to anti-ESG pressures.
• North Dakota: North Dakota is a major producer of oil and gas, with the energy sector playing a significant role in its economy ¹⁵. The state's political landscape, dominated by Republicans, also aligns with the anti-ESG movement.
• West Virginia: West Virginia has a long history of coal production, and the state's economy remains tied to the fossil fuel industry ¹⁵. This dependence could make it receptive to anti-ESG legislation.

Comparing and Contrasting Economic and Political Factors

While these states share some economic similarities with Wyoming, there are also key differences that could influence their likelihood of adopting anti-ESG legislation:

Oklahoma

Oklahoma's economy, while heavily reliant on oil and gas, is more diversified than Wyoming's, with aerospace and agriculture also playing significant roles ¹². This diversification could moderate the push for further anti-ESG legislation. Oklahoma also has a more diverse investor base, including angel investors and venture capital firms, which might be less supportive of measures that restrict investment options ¹⁶.

Alaska

Alaska's heavy dependence on oil revenue makes it potentially susceptible to anti-ESG pressures. However, the state also has a history of bipartisan cooperation on economic issues, which could make it more challenging to pass restrictive legislation. Additionally, Alaska has a strong fishing and tourism sector, which might be negatively impacted by policies perceived as hostile to environmental considerations.

North Dakota

North Dakota's economic profile is similar to Wyoming's in its reliance on natural resources, but its focus on agriculture alongside energy might provide a counterbalance to the anti-ESG movement. The state's strong Republican supermajority, however, suggests that anti-ESG legislation could gain traction if proponents push for it.

West Virginia

West Virginia faces significant economic challenges, including a declining population and struggles with diversification beyond its traditional reliance on coal. This could make the state more receptive to anti-ESG measures, particularly if they are framed as protecting existing industries. However, the state's limited investor activity and challenges in attracting capital might raise concerns about the potential economic consequences of restrictive legislation.

Proponents and Opponents: Motivations and Influence

The debate over anti-ESG legislation is not limited to Wyoming. In other states, various stakeholders have emerged as proponents and opponents of such measures, each with their own motivations and influence:

• Proponents: Proponents of anti-ESG legislation often include Republican lawmakers, fossil fuel industry representatives, and conservative advocacy groups. Their motivations typically center around protecting traditional industries, promoting free market principles, and pushing back against what they perceive as a "woke" agenda ⁷. In Oklahoma, for example, the Oklahoma Council of Public Affairs has been a vocal supporter of anti-ESG measures, arguing that they protect taxpayers and promote economic freedom ¹⁹.
• Opponents: Opponents of anti-ESG legislation often include Democratic lawmakers, environmental groups, investor groups, and some businesses. Their motivations typically center around concerns about climate change, social responsibility, long-term financial risks, and potential harm to state economies ²². In Oklahoma, the Oklahoma Public Employees' Retirement System (OPERS) has expressed concerns about the potential negative financial impact of anti-ESG laws ¹⁹.

The influence of these stakeholders varies depending on the specific state and its political context. In states with strong Republican majorities and a heavy reliance on fossil fuels, proponents of anti-ESG legislation may have more sway. However, in states with more diverse economies and a greater emphasis on sustainability, opponents may be able to exert more influence.

Differing perspectives on ESG investing often revolve around the role of government power in shaping the market ²³. Proponents of ESG argue that government intervention is necessary to correct market failures and promote socially responsible capitalism. Opponents, on the other hand, contend that such intervention distorts the market and undermines the pursuit of profit maximization.

Existing and Proposed ESG Legislation in Other States

Several states have already enacted or proposed ESG-related legislation, providing insights into the evolving landscape of this issue:

• Oklahoma: Oklahoma's Energy Discrimination Elimination Act of 2022 prohibits state government retirement systems from investing in companies that "boycott energy companies" ²⁴. However, this law has been permanently blocked by a district court judge, highlighting the potential legal challenges that such laws may face ¹⁸.
• Texas: Texas has passed legislation requiring state pension funds to divest from companies that boycott fossil fuel companies or firearm entities. The law also prohibits state contracts with these companies.
• Florida: Florida has enacted a law prohibiting state pension fund managers from considering ESG factors when making investment decisions and barring state and local governments from considering ESG factors in procurement.
• West Virginia: West Virginia has introduced legislation similar to Wyoming's House Bill 80, aiming to restrict state investments in companies perceived as hostile to fossil fuels.

These examples demonstrate the growing momentum of the anti-ESG movement at the state level. However, it's important to note that the specific provisions and scope of these laws vary, reflecting the unique economic and political contexts of each state.

Predicting the 2025 Landscape: Who Will Follow Wyoming?

Based on the analysis of economic and political factors, as well as existing and proposed legislation, the following states appear most likely to follow Wyoming's lead in enacting anti-ESG legislation in 2025:

• Oklahoma: Oklahoma has already demonstrated its willingness to enact anti-ESG measures, and its strong energy sector and conservative political landscape make it a prime candidate for further legislation. However, the recent court ruling blocking the state's existing anti-ESG law could create some uncertainty.
• West Virginia: West Virginia's economic dependence on fossil fuels and its conservative political supermajority suggest a high likelihood of anti-ESG legislation gaining traction.
• North Dakota: North Dakota's similar economic profile to Wyoming and its Republican supermajority make it a potential follower, although its less intense focus on fossil fuels might moderate the push for legislation.

It's worth noting that Wyoming itself has recently seen two proposed anti-ESG bills voted down ²⁵. These bills faced opposition due to concerns about their broad definitions of ESG, potential restrictions on investment options, and potential interference with fiduciary duties. The Wyoming Retirement System, for example, expressed concerns that the legislation could inadvertently restrict investment in a wide range of companies, including those with diversity and inclusion statements ²⁵. This suggests that even in states with a strong pro-fossil fuel stance, there may be resistance to overly broad anti-ESG measures.

However, it's important to acknowledge the dynamic nature of this issue. Public opinion, legal challenges, and economic realities could all influence the legislative landscape in 2025.

Conclusion: A Looming Battleground with Broader Implications

The anti-ESG movement is gaining momentum in the United States, with Wyoming's House Bill 80 being the latest example. While several states share economic and political similarities with Wyoming, the likelihood of them following suit depends on a complex interplay of factors, including:

• Economic dependence on fossil fuels: States with a heavier reliance on fossil fuel industries are more likely to be receptive to anti-ESG measures.
• Political landscape: States with strong Republican majorities and a conservative political climate are more likely to see anti-ESG legislation enacted.
• Investor base: The diversity and influence of the investor base in a state can play a role in shaping the debate over ESG.
• Public opinion: Shifting public attitudes towards ESG and the role of businesses in addressing social and environmental issues could influence legislative outcomes.
• Legal challenges: As seen in Oklahoma, anti-ESG laws may face legal challenges, which could affect their implementation and create uncertainty for other states considering similar measures.

The battle over ESG is likely to continue in 2025, with states serving as key battlegrounds in this evolving debate. The outcome of these battles will have broader implications for the future of sustainable investing in the United States, potentially influencing the flow of capital, corporate behavior, and the role of government in shaping market priorities.

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