South Carolina Rejects ESG In Public Retirement Investments
South Carolina Gov. Henry McMaster (R) signed a new state law this week that takes a decisive stand against the encroachment of environmental, social and governance (ESG) doctrine into the management of the state’s retirement system.
The newly signed “ESG Pension Protection Act” mandates that the South Carolina Retirement System Investment Commission (RSIC) focus solely on financial factors, aiming for the highest rate of return for its beneficiaries. This legislation, which garnered overwhelming bipartisan support, underscores a growing concern among conservatives regarding the influence of ESG investing on public funds.
ESG investing, which considers progressive and liberal social factors in addition to financial returns, has been criticized by many as a vehicle for advancing political agendas under the guise of investment strategy.
In his signing statement, McMaster highlighted the bill as a testament to South Carolina’s commitment to “responsible financial stewardship,” positioning the state against what he describes as the “liberal ESG agenda.” That position of financial responsibility is now enshrined in law, ensuring that investment decisions for the state’s retirement system are insulated from political considerations.
The RSIC, managing assets for the beneficiaries of five state-defined benefit plans, faces new operational mandates under this legislation. These include incurring additional costs to adhere to the bill’s requirements, such as managing proxy voting in-house or engaging external advisors, with estimates suggesting up to $1 million might be needed for implementation. Yet, these financial implications are viewed as necessary expenditures to safeguard the retirement savings of South Carolinians from being compromised by politically motivated investments.
The bill passed by a vote of 103-5 in the state House and 45-0 in the state Senate. That broad consensus signals the widespread skepticism toward ESG investing. Proponents of the bill, like state Rep. Bill Taylor (R), argue that removing politics from pension investments is essential, emphasizing the goal of maximizing returns for retirees.
Other critics of ESG investing, such as Americans for Prosperity-SC State Director Candace Carroll, applaud the legislation. Carroll’s statement encapsulates the sentiment of many conservatives who view ESG criteria as an unwelcome intrusion of “woke” ideology into the financial sector. She argues that in a strained economy, retirement savings must be maximized, not penalized by agendas alien to the interests of savers.
This legislative move by South Carolina could be a bellwether for similar actions in other states as debates over the role of ESG criteria in public investment strategies continue to gain traction. While supporters of ESG investing argue that it aligns investment strategies with broader societal and environmental goals, detractors see it as a departure from the foundational principles of investment management: to yield the best possible financial returns for investors.
