Legislation in the Oklahoma House of Representatives would combat environmental, social, and governance (ESG) scores by prohibiting lenders from discriminating against organizations based on social credit or value-based standards like ESG.
Environmental, social, and governance (ESG) scores are essentially a risk assessment mechanism increasingly being used by investment firms and financial institutions that force companies, entire industries, and society at large to focus upon politically motivated, subjective goals. Pursuing these goals often directly contravenes the interests of companies, shareholders, and customers, while also degrading macroeconomic prosperity, free markets, democratic institutions, and individual liberty.
Companies are graded on mandated ESG commitments to promote, for example, climate or social justice objectives. Those that are arbitrarily assigned low ESG scores can be punished by divestment, reduced access to credit and capital, and/or an inability to access financial services such as checking and savings accounts and insurance coverage.
The legislation would prohibit this kind of discrimination by large financial institutions. Specifically, the bill would prohibit these institutions from denying, restricting, or terminating services based on a person’s exercise of protected religious or expressive rights, lawful economic activity, or related associations, as safeguarded by the Oklahoma Constitution and the First Amendment to the U.S. Constitution.
ESG-driven financial discrimination against entire groups—whether industries, companies, or individuals—has been prolific. For example, in 2018, some large U.S. banks, including Citibank and Bank of America, implemented restrictions for gun manufacturers and retailers. According to reporting by The New York Times, “They are restricting their credit card and banking services to gun retailers and halting lending to gun makers that do not comply with age limits and background check rules determined by the banks. They are also freezing out businesses that sell high-capacity magazines and ‘bump stocks,’ attachments that enable semiautomatic rifles to fire faster, even though such products are legal under federal law.”
Deutsche Bank AG and Signature Bank announced in early 2021 that they would no longer provide services to President Donald Trump or his business, the Trump Organization.
Also in 2021, Sustainalytics, an ESG business owned by Morningstar, published a report titled How Sustainable Finance is Shaping Change in Banking. In the publication, Sustainalytics notes:
Most major banks screen their lending portfolios against specific ESG risks as per the OECD Due Diligence guidance, and many embrace negative or positive screening for potential corporate lending transactions or project finance transactions. Screening strategies filter potential transactions using predetermined ESG criteria to rule companies in or out of contention for financing. Negative screening and norm-based screening involve the exclusion or avoidance of transactions not aligned with environmental, social and ethical standards. Exclusion criteria often include issues like weapon manufacturing, tobacco sales or production of fossil fuels. While negative and norm-based screening are the most popular techniques used for ESG asset management, these practices have been losing traction since 2015.
Positive screening, on the other hand, selects corporate borrowers that score highly on ESG factors relative to their peers. This can include best-in-class screening, or the inclusion of investments in companies and sectors with higher ESG scores as compared to their peers or companies that are actively improving their ESG performance. This screening method does not necessarily exclude ESG laggards but rather focuses on those performing best with regards to ESG in relation to comparable companies or industries. In comparison to corporate lending transactions, the intensity of screening is often higher for project finance transactions given due diligence requirements under the Equator Principles.
Dozens of the world’s most powerful banks and insurance companies have, to varying degrees, weaponized ESG to screen out businesses and even some individuals who refuse to comply with those institutions’ social justice or environmental policies. Although there are many examples of financial institutions flexing their muscles as a tactic to create larger societal changes through ESG, perhaps the most economically important is that virtually every large bank in the United States has committed to forcing the businesses they work with to phase out their use of fossil fuels—even if it causes economic harm to customers and businesses.
Many of these financial institutions have pledged to make their entire business portfolios “net-zero emissions” by 2050, and to halve their emissions by 2030. If fulfilled, these pledges would necessitate that banks eliminate all or nearly all lending and banking activities with customers who use fossil fuels, including individuals who drive gasoline-powered motor vehicles, significantly impacting virtually every family and industry in the United States.
Most major U.S. banks—including JP Morgan Chase, Citigroup, Bank of America, Wells Fargo, Goldman Sachs, and Morgan Stanley, among others—have announced restrictions on financing for certain fossil fuel projects as well, such as coal mining and oil and natural gas projects. In addition, financial institutions such as JP Morgan Chase, Bank of America, Wells Fargo, and U.S. Bank and credit card processors such as PayPal have discriminated against faith-based organizations.
Discrimination has been endemic amongst insurance companies as well. Many major insurance companies across the globe have implemented policies refusing to underwrite fossil fuel projects, including Allianz, AXA, Swiss RE, Munich RE, Zurich Insurance Group, The Hartford, Chubb, and AIG.
For a recent example, in 2024, Zurich announced it would cease underwriting new oil and gas exploration and development projects, as well as metallurgical coal mining. Zurich also now requires its highest-emitting corporate clients to adopt credible climate transition plans aligned with a 1.5°C pathway and the goal of net-zero emissions by 2050. The company has stated it will review these clients’ progress and may terminate relationships that fail to show sufficient transition momentum.
Chubb updated its policies in 2024 as well. Chubb announced that it would continue to provide coverage for oil and gas producers with annual revenues greater than $1 billion that are demonstrating progress towards achieving near-zero methane emissions—0.2 percent—but that it may “decline coverage if a potential policyholder cannot meet our methane performance expectations.” In August 2024, Chubb withdrew its insurance coverage for the Rio Grande liquefied natural gas project in Brownville, Texas—one of the largest proposed fossil fuel infrastructure investments in the state.
Many ESG metrics, primarily those related to imposing environmental controls, are directly linked to the agricultural industry and food production. Examples of some of these metrics include: “Paris-aligned GHG emissions targets,” “Impact of GHG [greenhouse gas] emissions,” “Land use and ecological sensitivity,” “Impact of air pollution,” “Impact of freshwater consumption and withdrawal,” “Impact of solid waste disposal,” and “Nutrients”— which, despite its innocuous-sounding name, is a metric that forces companies to estimate the “metric tonnes of nitrogen, phosphorous, and potassium in fertilizer consumed.” Farmers and food producers use chemical fertilizers and pesticides for crop growth, in addition to producing waste byproducts, consuming substantial quantities of water, using vast swathes of land, and releasing what climate alarmists claim to be planet-ending carbon dioxide emissions.
The world has already experienced adverse food supply shocks caused directly and/or indirectly by ESG mandates, with the most prevalent occurring in Sri Lanka, where a regulatory ban on chemical fertilizers cut crop production nearly in half and resulted in societal upheaval that toppled the Sri Lankan government. Other disruptions in food supply related to ESG have occurred throughout Europe— especially in the Netherlands—as well as in Canada and the United States.
In the United States in particular, investment giants and banking behemoths had signed on to international agreements such as the United Nations-led Glasgow Financial Alliance for NetZero (GFANZ), a global coalition dedicated to climate change mitigation efforts organized under the auspices of the United Nations. Reading the tea leaves from the last presidential election, many of these firms, such as Bank of America, Citi, Goldman Sachs, JP Morgan, and Wells Fargo have since left the alliance. Back in 2021, GFANZ consisted of approximately 450 banks, investors, and insurance companies, whose members controlled $130 trillion in assets. Through GFANZ and its industry subgroups, such as the Net-Zero Asset Managers Initiative and the Net-Zero Banking Alliance—which controlled 41 percent of global banking assets in 2021, but has since folded—the world’s biggest investors and banks agreed to set United Nations-approved emissions targets for their agricultural clients by 2024.
Similar to the disastrous policies in Sri Lanka and elsewhere, nitrogen-based fertilizer use is being heavily targeted in the United States, and farmers are being urged to electrify their equipment as well as curtail meat and dairy production to create products that have “lower carbon-dioxide footprints,” to name only a few examples. Farmers and ranchers will soon be under enormous pressure to undertake these “voluntary” changes and reduce their emissions or risk being frozen out of bank financing.
A report released in 2024 by Ohio’s Buckeye Institute found that operating expenses for farmers under an ESG reporting system would increase by 34 percent, leading to more expensive groceries. Items like American cheese (79 percent), beef (70 percent), strawberries (47 percent), and chicken (39 percent), just to name a few examples, would increase significantly. Overall, the report estimates a 15 percent total increase in household grocery bills if ESG scoring is implemented.
Ultimately, ESG-driven financial discrimination, whether carried out by investment firms or insurance conglomerates, imposes political orthodoxy at the expense of sound risk assessment, consumer choice, and economic vitality. The common-sense provisions in this bill would go far in protecting the Oklahoma economy and Sooner companies from discrimination and denial of basic financial services. It would also ensure that radical activists, many from outside of this state and outside of this country, will not control the means of production and curtail the freedoms of every citizen of this state.
Heartland Impact can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Cameron Sholty, at csholty@heartlandimpact.org or 312/377- 4000.
