In 2021, Texas passed Senate Bills 13 and 19, groundbreaking legislation designed to protect its vital energy and firearms industries from the economic and political pressures of Environmental, Social, and Governance (ESG) dictates. These laws prevent state and local entities from engaging with financial firms that boycott these critical sectors. Despite recent criticism suggesting these measures have increased municipal borrowing costs, a closer examination of the data and broader economic implications reveals a different story—one of stability and continued prosperity.
The Texas Association of Business Chambers of Commerce Foundation (TABCCF) released a report in March 2024, asserting that underwriting costs for municipal bonds in Texas had more than doubled due to these laws, suggesting a detrimental economic impact. However, this assertion was based on incorrect data. When corrected data from the Texas Bond Review Board (BRB) was applied, it showed that the costs of bond issuance in 2022 and 2023 remained consistent with historical averages, debunking the report’s claims.
The corrected figures are telling: the average underwriting cost was $6.38 per $1,000 of bonds issued in 2022 and 2023, nearly identical to the $6.03 average from 2015 to 2021. The TABCCF’s initial claim of a nearly $700 million economic loss based on flawed data is not only incorrect but misleading, suggesting that the actual economic impact of Senate Bills 13 and 19 is negligible.
This correction is vital in understanding the true effect of Texas’ legislation. It’s not just about correcting a statistical error; it’s about challenging a narrative that these laws are economically harmful. The real story here is that despite the pushback from certain financial and political entities, Texas’ proactive stance has not harmed its financial stability or economic health.
Furthermore, the debate around Texas’ legislation highlights a broader national discussion on the role of ESG criteria in public investment and the importance of fiduciary duty—a legal obligation to prioritize the economic interests of beneficiaries, not ideological goals. The Center for Retirement Research at Boston College and the Committee to Unleash Prosperity have both published findings that support the view that ESG investments can underperform compared to non-ESG investments and may introduce increased risks and reduced returns.
Critics of Texas’ stance argue that adhering strictly to fiduciary duty without regard for ESG considerations might overlook long-term sustainable growth strategies. However, states like California, Vermont, and Connecticut, which have embraced ESG criteria, often face criticisms for prioritizing political and social agendas over sound fiscal management. These states have enacted policies that encourage divestment from fossil fuels and heavy investment in renewable energy, potentially sacrificing robust financial returns for ideological satisfaction.
The contrast couldn’t be starker. While pro-ESG states navigate the choppy waters of high operational costs and potential economic disruptions due to forced compliance with ESG mandates, Texas stands as a bulwark, ensuring that its economic policies are free from such constraints. The state’s legislation ensures that financial performance and fiduciary duty remain at the forefront, safeguarding the interests of its citizens and the health of its economy.
Moreover, the flawed TABCCF report and similar analyses from ESG proponents underscore the risks associated with politicized economic strategies. These strategies not only misrepresent the financial implications of anti-ESG laws but also attempt to sway public opinion and policy against measures that protect economic sovereignty.
Texas’ legislation on ESG is a testament to the state’s commitment to maintaining control over its economic destiny. Senate Bills 13 and 19 are not merely regulatory measures; they are bulwarks against the imposition of external financial and ideological pressures that could compromise the state’s economic stability. As Texas continues to defend its legislative choices, the evidence suggests that these laws are not only preserving the integrity of its industries but also ensuring that its fiscal policies are governed by sound economic principles rather than fleeting social trends. This approach should serve as a model for other states grappling with the complexities of ESG mandates versus economic reality.
Jason Isaac is the founder and CEO of the American Energy Institute and a distinguished fellow for Life:Powered at the Texas Public Policy Foundation. He previously served four terms as a Texas state representative.
