Rep. Nick Hoheisel, R-Wichita, sought passage of a House bill blocking state and local government from making investment and contracting decisions based on environmental, societal or governance (ESG) metrics. (Sherman Smith/Kansas Reflector)
TOPEKA — Bipartisan frustration flourished during Kansas House debate on a bill requiring state and local governments to ignore environmental and social factors and focus exclusively on achieving the greatest financial return when making contract decisions and pension investments.
Legislation approved Thursday by the House on a vote of 85-38 and forwarded to the Kansas Senate would amend state law to force the Kansas Public Employees Retirement System to concentrate on the fiduciary duty of maximizing monetary gain with a portfolio serving teachers and other government workers. The bill also would forbid the state, as well as cities, counties and school boards, from giving weight to environmental, social or governance criteria, or ESG, when signing contracts.
“We’re seeing governments weaponize and use pension systems and government contracts to further their ideological agendas,” said Rep. Nick Hoheisel, a Wichita Republican. “Most folks in this chamber, at least on my side, believe we should invest public funds with the best return on investment possible.”
House Minority Leader Vic Miller, D-Topeka, said the bill improperly restrained elected local government officials and would accomplish precisely what advocates claimed they were against.
“What are we doing with this bill except inserting our own politics into the market?” Miller said.
House Bill 2436 would make it illegal to give preference or to discriminate against specific businesses, including those engaged in nuclear, oil, coal or natural gas operations, agriculture production, forestry, mining, and firearm and ammunition manufacturing.
The legislation in the House would block contracting and investing tied to ESG goals such as diversity by race, ethnicity, sex or sexual orientation. It also specified investments and contracts couldn’t be guided by analysis of whether companies assisted employees in obtaining an abortion or with gender assignment surgery.
U.N., Neo-Nazi influences
The House stopped on procedural grounds an attempt by Rep. Michael Murphy, R-Sylvia, to tack on an amendment requiring Kansas investment advisers to secure written permission from clients before initiating investments aligned with ESG principles.
Murphy said the United Nations had worked for decades to infiltrate the economy with ideas of gender parity, racial justice and poverty reduction. The House bill would offer a measure of protection to key Kansas businesses from dangerous activists who didn’t put profit first, he said.
“It’s boycotting our industries in agriculture,” said Murphy, in an explanation of vote cosigned by more than 30 House Republicans. “I call for a resolution directing the Legislature to continue to seek solutions to protect the rights of Kansans and for future generations.”
Rep. John Carmichael, D-Wichita, said he was curious if the bill limited KPERS’ board of trustees to the absolute highest path to wealth or whether the pension system had wiggle room.
He offered this hypothetical: “If this bill were to become law and the best return on investment available to KPERS was from the American White Men’s Investment Pool, formerly known as the American Neo-Nazi Investment Pool, would KPERS be required to put our teachers’ and legislators’ pension money into the American White Men’s Investment Pool?”
‘Come back and bite us’
Rep. Sean Tarwater, R-Stilwell, and Rep. Rui Xu, D-Westood, agreed the bill wouldn’t do much to transform investment activity in Kansas. Tarwater had sought a deeper dive into the ESG problem and referred to the House bill, if signed into law, as “one of the weakest” in the United States.
“I wish we could have done better,” Tarwater said. “Sometimes we try to appease everybody, but we just can’t. It’s a narrow road. You’ve got constituents and businesses on one side. You’ve got your supporters on another. It’s hard to keep everybody happy.”
Xu, who failed to advance an amendment limiting the impact on local government, said ESG legislation was like a political flu spreading statehouse to statehouse.
“The only reason we’re doing this today is because this is the latest three-letter moral panic that right-wing talk radio has created,” he said. “Holding our cities hostage in this is going to lead to tons of unintended consequences. This is going to come back and bite us.”
The original version of the bill could have cost KPERS’ portfolio an estimated $3.6 billion, but modifications trimmed the cost to taxpayers to $800,000.
Rep. Dan Osman, D-Overland Park, said the idea of companies investing in societal or environmental objectives went back centuries. He said companies now managed trillions of dollars in investments based on ESG goals. This isn’t a fringe movement tied to a “woke leftist agenda,” he said.
“This is basically a concept that you can do good and make money at the same time,” Osman said. “If the companies weren’t making money, this policy wouldn’t ever go anywhere.”
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