New legislation put forward in Kansas that would prohibit ESG investing in the state’s pensions funds could cost the state’s pension system as much as $3.6bn in returns.
According to ESG Today, the Kansas Protection of Pensions and Businesses Against Ideological Interference Act would also block the state’s suppliers from integrating sustainability-focused factors in their operations.
The legislation aims to substantially block the use of ESG factors in investment, finance and business in the state, targeting firms it claims are engaged in ‘ideological boycotts’.
The proposals would require the Kansas Public Employees Retirement System (KPERS) to divest holdings in companies engaged in these so-called boycotts, requiring the state treasurer to publish a list of financial institutions engaged in these activities with banks on the list prohibited from receiving state deposits, and have state contractors provide written verification that they are not engaging in these boycotts.
Furthermore, the rules would extend beyond the state pension system and require registered investment advisors to obtain written consent from clients before making investments in ESG-driven funds.
However, media reports have highlighted that the bill may face challenges moving forward, given the highlighted cost revealed by the budget division report.
The report said, “With a reduction in expected returns of 0.85 percent, the KPERS general investment consultant projects that the investment portfolio returns would reduce by $3.6 billion over the next ten years when compared to the current investment portfolio.”
The Wyoming legislature recently voted down two pieces of anti-ESG legislation that would have impacted the state’s ability to invest in a range of funds.
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