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Senate committee passes anti-ESG bill

The Alabama Legislature is taking new steps to ensure companies that contract with the state consider emotional, social and governance factors.

SB151 by Sen. Arthur Orr (R-Decatur) passed the Senate Finance and Taxation Committee on Thursday, allowing it to proceed to the full Senate.

This bill would prevent Alabama pension funds from investing in asset managers that actually consider relevant environmental, social, and governance risks, and would prevent Alabama pension funds from investing in asset managers that actually consider relevant environmental, social, and governance risks. This would prevent consideration of the elements.

Section 4b of the bill reads: “When state agencies, commissions, bureaus, commissions, departments, agencies or their political divisions enter into contracts fully financed by state funds for the procurement of goods and services and the purchase of professional services, environmental , social and governance (ESG) criteria shall not be taken into account, and only financial factors shall be considered.”

The bill defines “social” as “diversity, racial justice, pay equity, or social justice issues,” and makes clear that the “social” element is not monetary.

“In other words, government agencies like the Alabama Department of Corrections (ADOC) would be prohibited from considering relevant ‘racial justice’ factors when hiring subcontractors.” said fossil fuel group Sunrise Project. ESG laws nationwide. “While ADOC could argue that a company's record of human rights abuses is related to the quality of its goods and services, given ADOC's appalling record, this bill would “It is likely to cover serious racial discrimination.”

Current and formerly incarcerated people are suing the department, accusing it of creating a system that forced black inmates to work and constituted “modern-day slavery.”

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The bill also states that Alabama's retirement plans “prioritize or align with environmental, social, and governance (ESG) standards over traditional fiduciary duties to maximize economic return.” It prohibits investment in financial institutions that are recognized as

The Sunrise Project also estimates that the bill could cost the state billions of dollars if passed, based on similar laws in other states.

A similar bill in Indiana is expected to cost $6.7 billion. The Texas County District Retirement System said it would similarly lose more than $6 billion.

Governor Kay Ivey already signed one of the most sweeping anti-ESG bills in the nation last legislative session.

“No matter how much corporate America and the national media try to force the social issues of the day on people, Alabama will continue to stand by both our values ​​and our businesses,” Ivey said upon signing the bill. . “Alabamians want ESG to impact business in the state in any way possible, and this legislation definitely sends that message. It’s a place of service. We call it common sense.”

The law specifically prohibits state agencies and local governments from contracting with companies that “boycott” other companies for not considering ESG standards.

The new law prohibits state entities themselves from considering ESG factors when entering into contracts.

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Governance factors that state institutions cannot take into account include “political contributions and lobbying, tax transparency, bribery and corruption,” among others.

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