In the tumultuous landscape of the US culture wars, fear and values have become the twin engines of US politics. Their combination forms a formidable narrative that sways voters. As a reader of ESG News, you’re likely no stranger to the fact that the latest specter raised by conservatives is ESG.

Many conservative states in the US have a right to be concerned as they are high exporters of fossil fuels. A transition may have far-reaching impacts on local citizens and their livelihoods. Despite talks of a responsible transition, which would include training populations for different skills, the worry of an ‘energy boycott’ persists but is misplaced.

Of course, it makes for good talking points as the political rhetoric seemingly ever escalates.

ESG has existed for two decades, and CSR goes back even further. In contrast, the pushback against these ideas is young, and politicians are making short-sighted mistakes in their pursuit to legislate. As of February 2024, there were at least 61 anti-ESG bills across state legislatures with one state leading the way in the latest sessions: Oklahoma with 14 bills.

Yet, Oklahoma is now backing off anti-ESG laws it has passed, so what is happening?

The concept of tradeoffs is at the heart of ESG. For instance, a financial services firm’s decision to boycott fossil fuels is considered a tradeoff for a sustainable transition. This is what conservative politicians are fixated on. Banks understand tradeoffs and risks, which is why they are not actually divesting from fossil fuels. Meanwhile, conservative states like Oklahoma seem to have overlooked this careful planning and are now engaging in boycotts of their own.

The unforeseen tradeoffs are coming back around with a vengeance. Boycotting banks costs taxpayers money, a lot of it. Indiana’s Chamber of Commerce assessed the state’s initial anti-ESG bill at $6.7B, causing legislators to reduce its impact. Wharton estimated that Texas’s anti-ESG bills would cost cities $303M to $532M. The cost of financing goes up when your choices are limited.

The Oklahoma Rural Association has found that in the 17 months since that state passed its anti-ESG law, it has cost municipalities an additional $185M or $11M monthly. The report concludes that “Policymakers should carefully consider these downstream impacts when evaluating the merits of anti-ESG legislation.” 

ESG is all about a thoughtful approach that considers the tradeoffs and stakeholders. Of course, if ESG is also about long-term growth and resilience, the anti-ESG push indeed proves to be the opposite.

Related Article: How I see it – Grounded by Fear, Fueled by Opportunity: The Case for High-Speed Rail 

This article is contributed by Matthew Sekol. Every week ESG News delivers smart commentary from ESG practitioners and experts to unpack issues of the day. Submit an article for editorial consideration for the ESG Unpacked series here: [email protected]