North Carolina legislature overrides governor’s veto of ESG ban

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North Carolina Gov. Roy Cooper and ESG investing suffered another setback this week when the Republican-controlled legislature voted to override his veto of legislation prohibiting the climate-focused financial strategy from being used with state pension funds.

Wielding their veto-proof majority, Republicans secured the three-fifths vote in the state House and Senate needed to override the veto from Mr. Cooper, a Democrat.

“We are grateful to those lawmakers who understand the need to shield the state pension plan against the movement to weaponize public retirement systems to achieve extreme agendas,” said North Carolina Treasurer Dale Folwell.

Mr. Folwell, a Republican who oversees the state’s public retirement system and is running for governor against Mr. Cooper, is among the array of GOP state financial officials across the country who have sought to bar ESG in state pension investments. 

The veto override was the latest rebuke of Mr. Cooper from a lawmaker who defected from the Democratic Party. Saying that the “modern-day Democratic Party has become unrecognizable to me,” Rep. Tricia Cotham switched to Republican in April, giving the GOP a veto-proof majority in the House. 

The Tar Heel state’s Senate already had a veto-proof majority.

The legislature has since overridden Mr. Cooper’s vetoes of bills to impose a 12-week abortion ban, loosen wetland protections and prohibit asking state job applicants about political beliefs.

More than a dozen other states such as Texas, Florida, West Virginia and Louisiana, have passed laws barring ESG — short for environmental, social and corporate governance investing — from use in managing public pension programs.

The hot-button practice, which conservatives call “woke socialism,” takes into consideration non-monetary factors like climate change and social justice politics that proponents say could impact long-term investment returns.

North Carolina Retirement Systems includes more than 1 million retirees and is valued at roughly $114 billion. It is the 12th largest public pension fund in the U.S.

Previously, Mr. Folwell took back proxy voting power for $14 billion of its investments with BlackRock, a move the treasurer said was to combat the behemoth asset manager’s pro-ESG investing strategies. Mr. Folwell is among Republican officials who have called on BlackRock CEO Larry Fink to resign over his support of ESG.

“We don’t need a law to tell us what is right and wrong,” Mr. Folwell said. “But now we do have a law that very clearly defines the guardrails.”

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