Arkansas law creating ESG oversight committee goes into effect Tuesday

(The Center Square) - An Arkansas law creating an oversight committee that will consider banning companies that boycott energy and firearms companies goes into effect Tuesday.

The five-member committee has 90 days to submit its list, according to Act 411, signed by Gov. Sarah Huckabee Sanders in March. Appointees from the governor's office, the House of Representatives, the Senate, the attorney general's office and the treasurer or their representative will make up the committee.

A separate act establishes the criteria the committee can use to determine if companies are boycotting or using environmental, social and governance factors to assess financial decisions. Media reports, complaints from energy or firearms companies and public statements from the company are some measures the committee can consider.

The state and public entities could no longer conduct business with the companies. Both have a year to divest retirement accounts and 60 days to divest other holdings, according to the act.

The bills, both sponsored by Rep. Jeffrey Wardlaw, R-Hermitage, raised concerns about possible costs to the state. A clause was added to both bills that says the entities do not have to divest if they can prove it would cost them money.

The state treasurer will maintain the list. The governor can recall the committee if changes are needed, according to the act.

The bill is one of several addressing ESG passed by state legislatures this year.

Alabama Gov. Kay Ivey signed a bill that bans states from doing business with companies that engage in economic boycotts, with a few exceptions.

In Tennessee, Gov. Bill Lee signed a bill that prevents the state's treasurer from investing state funds based on ESG. The bill's fiscal note states it will not significantly impact state or local revenues.

Other states have rejected ESG bills. North Carolina Gov. Roy Cooper vetoed a bill that banned ESG policies in state hiring and financial matters.

Arizona Gov. Katie Hobbs also nixed a bill passed by lawmakers that banned ESG investment practices.