Legislators looking at ways to eliminate use of progressive business principles – Greater Baton Rouge Business Report

A panel led by two conservative Louisiana legislators is working to understand and eventually end the use of progressive corporate principles known as ESG that often support sustainable energy and socially responsible ways to do business.
The acronym—which stands for environmental, social and corporate governance—is used primarily in the investment and insurance sectors, and it has become the latest target of politicians who see it as a threat to the fossil fuels industry. 
Rep. Valarie Hodges, R-Denham Springs, sponsored House Resolution 246 in this year’s legislative session. It formed the Environmental, Social, and Governance Criteria Study Group.
The study group held its first meeting last week, during which chair Rep. Larry Frieman, R-Abita Springs, said its goals are to understand what ESG is and “hopefully eliminate its use in our state of Louisiana in all of our sectors and industries.”
On the insurance side, ESG is a set of metrics used to rate a company’s exposure to risk factors that fall under the categories of environmental, social and corporate governance risks.
One example, according to the CFA Institute’s Chris Fidler, is an insurance underwriter assessing the environmental risk of a company in a flood-prone area. The CFA institute is cited in Hodges’ resolution.
A social factor might include whether a company exploits cheap foreign labor, and a governance factor could include whether a company has conflicts of interest on its executive board. The “G” in ESG is the least controversial category of the three, Fidler says. In the financial sector, some banks offer discounts to corporate borrowers who meet various ESG goals, according to The Washington Post.
In a similar way, investors can use ESG factors to decide which companies they want to invest in as a way to make a profit while influencing society at the same time. It’s called impact investing, Fidler says. Investors can use their own personal ESG criteria to rate and select companies or can invest in pre-packaged ESG funds offered by brokerage firms that have already assessed the companies.
Read the full story from the Louisiana Illuminator. 


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