Bankers say proposal on ‘environmental, social and governance’ too broad, amendments needed

LINCOLN, Neb. (Nebraska Examiner)— A proposal aimed at preventing a Nebraska State Treasurer from using state funds for “social and political” goals ran into complaints Monday that it was too vague and meddled too much in banking decisions.

Robert Hallstrom of the Nebraska Bankers Association said that banks have traditionally been free to “lend to, invest in and generally do business with any activity or entity that is legal.”

Hallstrom told the Legislature’s Banking, Commerce and Insurance Committee that Legislative Bill 67 would require a State Treasurer to try to dictate a bank’s business.

He provided amendments to the bill, discussed with the introducer of the bill, State Sen. Julie Slama of Sterling, and State Treasurer John Murante, that Hallstrom said would remove opposition by the bankers association and make it clear that state treasurers were not guiding investment policies of banks.

ESG is national issue

LB 67 is a local salvo in a nationwide battle over whether financial firms should invest state funds with “environmental, social and governance” goals in mind. Should, for instance, investments be shifted to “green” energy rather than fossil fuels due to concerns about climate change, and should a company’s diversity policies be considered, not just its return on investment.

Conservative critics of ESG, which include Murante, call it “woke capitalism” and contrary to the goal of maximizing investment returns. Defenders of ESG maintain that issues such as climate change are real and must be considered.

Concerns about ESG have prompted some conservative states, including West Virginia, Texas and Florida, to pass laws blacklisting firms that consider ESG when investing. In December, then-Nebraska Attorney General Doug Peterson issued a report warning that ESG was a threat to democracy.

The issue has also inspired a backlash by 13 state treasurers, including those in Colorado, Wisconsin and New York, who say such anti-ESG bills restrict access to major financial firms and, in the end, hurt taxpayers. Peterson’s report was panned by some as “political theater.”

Under LB 67 as introduced, a Nebraska state treasurer would be blocked from depositing state funds that are “used by financial institutions for social or political causes or objectives.”

Neutrality the goal

Slama, who chairs the Business Committee, said that taxpayer dollars “should not be used to further political or social agendas.” She said she wanted neutrality among treasurers.

Murante, who is a past president of a conservative treasurer’s organization that claims ESG is “woke,” said that lawmakers need not worry about him using funds for ESG purposes. But, he said, some state treasurers in other states are “openly running” on the plank of investing using ESG considerations, and the bill was needed to block future Nebraska treasurers from doing the same.

“While I don’t believe we have a problem in Nebraska today, it is clear that there is growing pressure on state treasurers across the country to make political decisions and not financial decisions,” said Murante, the former head of the State Financial Officers Foundation.

‘Why are we doing this?’

Lincoln Sens. Eliot Bostar and George Dungan both said the bill appeared overly vague and too broad and worried it could lead to some unintended consequences.

Bostar questioned why the bill was even necessary, given Murante’s statements that it wouldn’t affect him and that the treasurer already has the power to end banking relationships that become “politicized.”

“Why are we doing this?” the state senator asked.

Murante said it was a proactive, “belt and suspenders” approach that would make it clear in the law.

“We need to be preemptively and aggressively ensuring that those (state taxpayer) dollars are protected,” the treasurer said. Murante said that his office has checking accounts in 52 banks currently.

North Platte Sen. Mike Jacobson, who is a banker, pointed out that funds deposited with a bank are not segregated, so it would be difficult to separate which are state deposits and deposits of others.

Slama said negotiations on the LB 67 are ongoing.

The Banking Committee took no action on the bill after the public hearing.

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