Kentucky Republicans mull expanding ESG-related investment disclosure


In an attempt to further sever the state’s financial ties with businesses that have divested from the fossil fuel industry, Kentucky lawmakers are mulling new anti-ESG investment regulations.

Attorney General David Cameron affirmed his support for expanding disclosure rules for environmental, social, and governance-related investments by major banks and businesses, and giving the state wider authority to stop doing business with firms that do not do business with fossil fuel companies.

“Kentucky is an energy state,” he said in a statement. “This is why I am defending Kentucky from an ESG movement that would destroy the commonwealth’s competitive advantage and cripple our economy.”

In 2021, Kentucky’s General Assembly passed a bill allowing state authorities to cease business with banks, investment firms, and other financial service providers that have anti-fossil fuel policies. Proponents of the law said the act halts businesses from taking actions that threaten returns on a host of publicly managed financial portfolios. Many states have enacted laws barring banks from municipal bond deals if the firms are deemed to be against firearms and fossil fuel industries.


The law requires the state treasurer to keep a list of companies engaged that do not do business with fossil fuel companies and allows the state to sever ties with any firm listed that it does over $1 million of business with annually.

“Large investment firms are colluding to force fossil energy companies to cannibalize their existing businesses and direct time and attention away from increasing shareholder returns,” the bill says.

The talks on expanding disclosure requirements come amid an ongoing spat between Cameron and major investment firms playing out in civil court in Franklin County.

In October, Cameron requested additional disclosure on ESG-related decisions and investments from Bank of America, Citigroup, Goldman Sachs, JPMorgan, Morgan Stanley, and Wells Fargo, with the banks filing a lawsuit to stop the action.

“These institutions see climate risk as financial risk and seek to protect the assets,” the legal action continued. “Some states strongly disagree and have designed laws to ban such banks from managing state pension dollars or securing state contracts despite their financial qualifications, if they are deemed to have anti-fossil fuel policies. Kentucky has such a law.”

A countersuit filed last month by the banks said Cameron’s decision to issue subpoenas to six of the country’s largest financial institutions was an attempt to “punish banks and investment houses that restrict investments in fossil fuel companies.” The Kentucky Bankers Association also challenged Cameron’s authority to demand detailed information from the six large banks.

Kentucky’s ESG law allows ESG-consciousness businesses deemed profitable to continue to work with the state.

“Climate change is a particularly relevant and active part of investment strategy for banks and housing developers,” the Institute for Energy Economics and Financial Analysis, a policy institute based in neighboring Ohio, said in a report looking at the evolving regulations in Kentucky. “ESG rules in general are a widely recognized set of guidelines used to make decisions.”

Major companies decoupling investments from the fossil fuel industry are prudently reassessing their investments, the IEEFA report said, and betting on a changing and dynamic energy economy where the demand for gas and oil drops.

“Most major companies in the world are taking steps to defend against climate risk,” it said. “The state’s economic development leaders are supporting policies that are diametrically opposed to such a view.”

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