North Carolina

Title

Key Dates

Nature of
Action

ESG Category

Summary

HB750: Address ESG Factors

Effective date
6/27/2023

Adopted
6/27/2023

Introduced 4/18/2023

Legislation

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■A fiduciary's evaluation of an investment shall take into account only pecuniary factors.

■Environmental, social, corporate governance, or other similarly oriented considerations are pecuniary factors only if they present economic risks or opportunities that qualified investment professionals would treat as material economic considerations under generally accepted investment theories.

SUBSEQUENT DEVELOPMENTS
A North Carolina anti-ESG bill has become law after Republican lawmakers voted to override Democratic Gov. Roy Cooper's veto of the bill. The legislation will bar state entities from considering ESG criteria when making investment and employment decisions. The state Senate overrode the veto in a 29-16 vote on June 27, following a 72-46 vote in the House. Mr. Cooper originally vetoed the bill on June 23, arguing that it "unnecessarily limits the treasurer's ability to make decisions based on the best interest of state retirees and the fiscal health of the retirement fund," in a statement.

State Treasurer Calls for BlackRock CEO to Step Down

Adopted and in effect
12/9/2022

Treasurer Position

Target Entities That Boycott Certain Industries

■ State Treasurer calls for BlackRock CEO to resign or be removed from his position, claiming that “[his] political agenda has gotten in the way of his same fiduciary duty.” Currently the North Carolina Retirement Systems has approximately $14 billion invested in BlackRock funds with an additional $55 million invested in BlackRock stocks or bonds.

Title

Key Dates

Nature of
Action

ESG Category

Summary

HB 784: Financial Institutions/ESG Factors

Introduced in 2023, carried over to 2024

Legislation

Prohibit Discrimination on Basis of Social Credit or ESG Scores

■Prohibits financial institutions from discriminating based on political affiliation or value-based or impact-based criteria, including environmental, social, and governance credit factors.

S737: State Employee Retirement Protection Act

Introduced in 2023, carried over to 2024

Legislation

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ An Act addressing the use of ESG criteria by state agencies and state pension plan fiduciaries. Largely overlaps with S679 below by prohibiting fiduciaries from considering nonpecuniary factors with respect to investment decision-making and proxy voting.

S679: NC Public Finance Protection Act

Introduced in 2023, carried over to 2024

Legislation

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ Provides fiduciary standards of care, delegation of authority, authority for voting on shares, and proxy voting requirements; prohibits consideration of non-pecuniary factors; authorizes the attorney general to enforce this act.

■ Clarifies that ESG or other similarly oriented considerations are pecuniary factors only if they present economic risks or opportunities that qualified investment professionals would treat as material economic considerations under generally accepted investment theories. The weight given to those factors should solely reflect a prudent assessment of their impact on risk and return. Fiduciaries considering ESG or other similarly oriented factors as pecuniary factors are also required to examine the level of diversification, degree of liquidity, and the potential risk-return in comparison with other available alternative investments that would play a similar role in their plans' portfolios.

HB 24: Review of Federal Acts/Rules/Regulations

Introduced in 2023, carried over to 2024

Legislation

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■Provides for legislative review or review by the attorney general of federal acts to determine the constitutionality of those acts and to prohibit the implementation of unconstitutional federal laws, rules, and executive orders. Including the regulation of the financial sector as it relates to ESG standards.