Alabama

Title

Key Dates

Nature of
Action

ESG Category

Summary

SB261: Relating to Public Contracts

Effective date
10/1/2023

Adopted
6/6/2023

Introduced
4/27/2023

Legislation

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ Prohibits a governmental entity from entering into a public contract for goods or services with companies that boycott fossil fuel, timber, mining, agriculture, and firearm industries or based on certain ESG standards.

■ Prohibits any company in Alabama from being required to engage in, or being penalized for not being engaged in economic boycotts or other actions that further social, political, or ideological interests.

■ Authorizes the Attorney General to seek to prohibit the adoption of federal laws or actions that may penalize or limit the activities of Alabama companies or residents based on the furtherance of economic boycott criteria.

SUBSEQUENT DEVELOPMENTS

In May 2023, the State Auditor showed support for SB261 and claimed that "People don’t want" ESG investing.

Target Entities That Boycott Certain Industries

Attorney General

Position

Attorney General Testified at the US House Oversight Committee's ESG Hearing

Adopted and in effect
5/10/2023

Attorney General

Position

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ On May 10, 2023, Alabama Attorney General Steven Marshall testified at the US House Oversight Committee's ESG hearing, alleging that the ESG policies promoted by "global elites" hurt the consumers and State AGs should protect consumers from ESG.

SUBSEQUENT DEVELOPMENTS

On May 23, 2023, Marshall published an op-ed in Wall Street Journal further elaborating on the Utah Attorney General's and his anti-ESG stance expressed in the hearing.

AG Marshall: Left using ESG to 'inject issues and create change that they can't get at the ballot box, particularly in a state like Alabama'

Adopted and in effect
3/19/2023

Attorney General

Position

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ Alabama State Attorney General Steve Marshall stated in an interview that Alabama was not able to acquire all of the financing they needed for a bond to build new prisons due to ESG-related impacts on Alabama's credit rating. He also stated that he is working to make sure that investment advisers are not able to invest in ESG investments when they may not have the best return.

Prohibit Discrimination on Basis of Social Credit or ESG Scores

State Treasurer Boozer, Retirement Systems of Alabama Deny using ESG criteria for Investments

Adopted and in effect
10/17/2022

Treasurer Position

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ Local news reported that Alabama State Treasurer Young Boozer insists that the State Treasury does not make investment decisions using ESG criteria.

Title

Key Dates

Nature of
Action

ESG Category

Summary

■ The bill prohibits financial institutions and insurers from discriminating against individuals based on social credit scores, which include factors such as religious exercise, speech, business activities, and other nonquantitative factors.

■ If a financial institution refuses to provide, restricts, or terminates services, the customer can request a detailed explanation. The institution must provide a statement of specific reasons, including the basis for the decision and relevant terms of service.

■ Violations of the act can result in enforcement actions by the Alabama State Banking Department or the Alabama Department of Insurance. Penalties include fines and potential civil actions for damages.

■ Prohibits the Boards of Control of the Teachers' Retirement System of Alabama and the Employees' Retirement System of Alabama from the purchase or sale of any publicly traded securities to or from certain entities affiliated with Communist Chinese military companies or any publicly traded securities that are derivative of such securities or are designed to provide investment exposure to such securities.

■  Requires the State Auditor or his or her designee to create a list of restricted entities and update the list each six months. Prohibits the retirement system from engaging in investment activities with a listed restricted entity. Upon publication of the restricted entity list, requires the Boards of Control of the retirement systems to identify any holdings of the retirement system in such a restricted entity and, acting as a prudent investor, expeditiously divest from any holdings or other investment activity in that entity.

Title

Key Dates

Nature of
Action

ESG Category

Summary

HB61: Public Contracts; ESG Criteria Prohibited in Public Contract. 

Introduced, but did not pass in the 2024 legislative session

Legislation

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ Pre-filed bill that is set to become effective January 1, 2025 if enacted.

■Prohibits a state or local governmental agency or other public awarding authority from considering ESG criteria or an ESG rating when awarding a public contract (valued at $100,000 or more).  An "ESG Rating" is defined as a measurement of an individual's ESG criteria based on an assessment of their quality, standard, or performance.

■ Before a public awarding authority may award a contract, the bill requires a bidder to certify that its employees will not be subject to a Personal ESG Rating as a basis of hiring, firing, or evaluation. "Personal ESG Rating" is defined as  any measurement of an individual's personal lifestyle choices, including, but not limited to, any of the following criteria: (a) Dietary choices, (b) Sustainable energy usage, (c) Transportation habits, (d) Environmental impact, (e) Ethical or sustainable purchasing choices, (f) Recycling habits, (g) Carbon footprint, or (h) Personal contributions to social justice issues.

Prohibit Discrimination on Basis of Social Credit or ESG Scores

■ Set to become effective October 1, 2024, if enacted.                                                                               

■ Requires the Board of Control of the Teachers' Retirement Systems of Alabama and the Board of Control of the Retirement Systems of Alabama (together, the Boards) to discharge their duties solely in the interest of, and for the exclusive purpose of providing benefits to, their members and beneficiaries. The Boards may consider, as a secondary factor, the impact of an investment on the well-being of the State of Alabama but may not subordinate the interests of their members and beneficiaries and may not sacrifice investment returns or take an additional investment risk to promote any other non-pecuniary factors.      

■ A "pecuniary factor" is a factor that the Boards prudently determine is expected to have a material effect on the risk or returns of an investment based on appropriate investment horizons consistent with applicable investment objectives and funding policy. The term does include the furtherance of any "environmental", "social", or "governance" agenda.   

SUBSEQUENT DEVELOPMENTS

On May 7, 2024, the Senate said it would indefinitely postpone consideration of the legislation (therefore, it is likely dead, since Alabama does not have carryover)

HB188: Relating to Public Contracts

Introduced, but did not pass in the 2023 legislative session

Legislation

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ Prohibits the consideration of ESG criteria or an ESG rating when awarding a public contract. Requires a responsible bidder, as a condition of being awarded a public contract, to certify that its employees will not be subject to a personal ESG rating as a basis of hiring, firing, or evaluation.

SUBSEQUENT DEVELOPMENTS

Bill was "indefinitely postponed" on 5/31/23 in the House. Legislative session ended on 6/14/23.